CSTR - CapStar stock drops to near 20-month low after Piper Sandler downgrade

Piper Sandler downgraded CapStar Financial ( NASDAQ: CSTR ) to Neutral from Overweight due to higher operational losses, primarily within Tri-Net.

CapStar ( CSTR ) stock dropped 10.8% on Monday to a near 20-month low.

"Q3 was a difficult quarter where $2.2M in operational losses exacerbated recent issues at the bank. Hopefully CapStar ( CSTR ) can put these problems in the rearview, but it will likely take several clean quarters to fully regain the trust of investors," analyst Stephen Scouten wrote in a note to clients.

Scouten reduced his price target on CapStar ( CSTR ) to $19 from $24, due to concerns around risk management and EPS growth rates. The new PT implies potential upside of 4.3% to its last close.

Piper Sandler also lowered its EPS estimates for 2022/23 to $1.83/$1.87 (from $1.93/$2.20) and established 2024 estimate at $2.01.

"Our estimate changes reflect lower NII and weaker fees, partially offset by a lower expense run rate," said Scouten.

He said he does not expect buyback activity as CapStar ( CSTR ) will reserve capital for core loan growth with $120M funding tied up with Tri-Net loans that were moved to HFI.

Piper Sandler's rating is in line with SA Quant's Hold rating , but contrasts bullish sell-side ratings .

Shares of CapStar ( CSTR ) declined 22.4% YTD.

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