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Why It's Wise to Hold SVB Financial (SIVB) Stock for Now
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SVB Financial Group’s strong capital position and consistent growth in loans and deposits position it well for future growth. Also, shares of the company have gained 62.7% in the past 12 months, outpacing the 28.6% growth for the industry it belongs to.
However, mounting expenses and lack of geographic diversification remain major concerns.
Nevertheless, the company’s Zacks Consensus Estimate for the current year earnings have been revised nearly 3.1% upward in the last 30 days, reflecting analyst’s optimism about its earnings growth prospects.
Looking at the fundamentals, the company has been witnessing consistent growth in deposits and net interest income (NII) over the past several years. It has seen its non-interest-bearing demand deposits increasing at a CAGR of 14% over the last three years (2014–2016). This change in deposit mix is expected to drive the company’s organic growth.
Also, pressure on the company’s net-interest margin (NIM) seems to be easing gradually with improvement in the rate environment. Notably, driven by a consistent growth in loans, management projects NIM to rise further in 2017.
Further, the company’s efforts toward improving non-interest income, which constituted nearly 27% of net revenue in the first half of 2017, should further support top-line growth.
However, SVB Financial has been witnessing a consistent rise in operating expenses for the past few years, primarily due to rise in compensation and benefit costs. Expenses increased at a CAGR of 12.4% in the last five years (2012–2016).
Thus, elevated expenses are expected to hurt the company’s profitability in the near term.
Also, the company has minimal international exposure and derives less than 10% of its total revenue from foreign clients. Lack of geographic diversification might hamper the company’s financials in the quarters ahead.
The stock currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the finance space worth considering are Zions Bancorporation (ZION - Free Report) , Farmers Capital Bank Corporation and The Bank of New York Mellon Corporation (BK - Free Report) .
Zions Bancorporation has witnessed an upward earnings estimate revision of 8.9% for the current year over the past 30 days. Its share price has risen 54.1% in a year’s time. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Farmers Capital has witnessed an upward earnings estimate revision of 5.1% for the current year over the past 30 days. Its shares gained 23.7% in the past 12 months. It also carries a Zacks Rank #1.
BNY Mellon carries a Zacks Rank #2 (Buy). It has witnessed an upward earnings estimate revision of nearly 1% for the current year over the past 30 days and it rallied 30% in a year.
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Why It's Wise to Hold SVB Financial (SIVB) Stock for Now
SVB Financial Group’s strong capital position and consistent growth in loans and deposits position it well for future growth. Also, shares of the company have gained 62.7% in the past 12 months, outpacing the 28.6% growth for the industry it belongs to.
However, mounting expenses and lack of geographic diversification remain major concerns.
Nevertheless, the company’s Zacks Consensus Estimate for the current year earnings have been revised nearly 3.1% upward in the last 30 days, reflecting analyst’s optimism about its earnings growth prospects.
Looking at the fundamentals, the company has been witnessing consistent growth in deposits and net interest income (NII) over the past several years. It has seen its non-interest-bearing demand deposits increasing at a CAGR of 14% over the last three years (2014–2016). This change in deposit mix is expected to drive the company’s organic growth.
Also, pressure on the company’s net-interest margin (NIM) seems to be easing gradually with improvement in the rate environment. Notably, driven by a consistent growth in loans, management projects NIM to rise further in 2017.
Further, the company’s efforts toward improving non-interest income, which constituted nearly 27% of net revenue in the first half of 2017, should further support top-line growth.
However, SVB Financial has been witnessing a consistent rise in operating expenses for the past few years, primarily due to rise in compensation and benefit costs. Expenses increased at a CAGR of 12.4% in the last five years (2012–2016).
Thus, elevated expenses are expected to hurt the company’s profitability in the near term.
Also, the company has minimal international exposure and derives less than 10% of its total revenue from foreign clients. Lack of geographic diversification might hamper the company’s financials in the quarters ahead.
The stock currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the finance space worth considering are Zions Bancorporation (ZION - Free Report) , Farmers Capital Bank Corporation and The Bank of New York Mellon Corporation (BK - Free Report) .
Zions Bancorporation has witnessed an upward earnings estimate revision of 8.9% for the current year over the past 30 days. Its share price has risen 54.1% in a year’s time. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Farmers Capital has witnessed an upward earnings estimate revision of 5.1% for the current year over the past 30 days. Its shares gained 23.7% in the past 12 months. It also carries a Zacks Rank #1.
BNY Mellon carries a Zacks Rank #2 (Buy). It has witnessed an upward earnings estimate revision of nearly 1% for the current year over the past 30 days and it rallied 30% in a year.
5 Trades Could Profit "Big-League" from Trump Policies
If the stocks above spark your interest, wait until you look into companies primed to make substantial gains from Washington's changing course.
Today Zacks reveals 5 tickers that could benefit from new trends like streamlined drug approvals, tariffs, lower taxes, higher interest rates, and spending surges in defense and infrastructure. See these buy recommendations now >>