- Northland Capital on Tuesday downgraded Encore Capital ( NASDAQ: ECPG ) to Market Perform from Outperform as it expects the specialty finance company's earnings will "probably lag a quarter or two".
- "We believe charged-off credit card balances will continue to increase and will start another wave of growth/purchases for ECPG," said analyst Mike Grondahl. "We believe the recovery of the purchase market will continue to improve in 2023/2024 as many credit card issuers have forecasted higher losses."
- Encore ( ECPG ) management noted a few weak quarters due to collections normalizing post stimulus and macroeconomic challenges on consumer and soft purchases over the last two years. "We still think patience is warranted and the risk of an impairment charge is real due to soft collections," said Grondahl.
- Northland set a price target of $58 on Encore ( ECPG ), representing ~10x 2023E EPS of $5.82, which implies 0.8% potential upside.
- Encore ( ECPG ) will report Q4 results after markets close on February 22.
- Northland's stance on Encore ( ECPG ) is in line with SA Quant's Hold rating , but contrasts bullish sell-side ratings .
For further details see:
Northland moves to sidelines on Encore Capital as earnings outlook weak