Cautious Outlook on Navient: Sell Rating Due to Profitability Concerns and Risk Exposure

Analyst Moshe Orenbuch of TD Cowen maintained a Sell rating on Navient (NAVI – Research Report), boosting the price target to $12.00.

Moshe Orenbuch has given his Sell rating due to a combination of factors, primarily focusing on Navient’s financial performance and future outlook. Despite reporting a higher-than-expected core EPS, the company faced a GAAP EPS loss, which raises concerns about its profitability. The improvement in EPS was largely driven by a temporary decline in the cost of funds, which may not be sustainable in the long term.
Additionally, while Navient has shown growth in private education loan originations, the potential changes to the Grad PLUS program and the company’s exposure to interest rate fluctuations pose risks. The sale of the BPS unit, although beneficial for reducing expenses, eliminates a profitable income stream, potentially impacting future earnings. These factors contribute to a cautious outlook, justifying the Sell rating.