Analyst urges 'caution and patience' on alternative lending stocks
BNN Bloomberg
The rapidly-changing dynamics of the mortgage market have pressured alternative lending stocks this year, leading one analyst to warn there could be more room for their share prices to continue falling in the coming months.
“While these depressed levels may signal an attractive entry point, we believe caution and patience remain the appropriate strategy heading into [second-quarter] results and likely for the remainder of the year,” Jaeme Gloyn, an analyst with National Bank of Canada Financial Markets, said in a note on Tuesday.
Shares of Home Capital Group Inc., EQB Inc., Timbercreek Financial Corp. and First National Financial Corp. have fallen between 12 and 35 per cent since the beginning of the year, with Home Capital the biggest laggard. Those stock declines underperformed the broader S&P/TSX Financials subgroup, which is down 11.3 per cent year-to-date.
Gloyn cited a myriad of potential downside risks for mortgage stocks and lowered his 12-month price targets on all four companies. His stock recommendations remain unchanged. Home Capital and EQB are rated as outperform (the equivalent of a buy). First National and Timbercreek are rated as sector perform (the equivalent of a hold).
