SLM Credit Trends Show Slowing Deterioration but Elevated Risks Justify Maintaining Hold Rating

Analyst Jeffrey Adelson of Morgan Stanley maintained a Hold rating on SLM, retaining the price target of $30.00.

Jeffrey Adelson has given his Hold rating due to a combination of factors that reflect both improvement and lingering risks in SLM’s credit performance. He notes that while delinquencies across SLM’s trusts are still trending higher year over year, the pace of deterioration is slowing and recent readings are slightly better than typical seasonal patterns. Early-stage delinquencies have begun to roll forward into more serious buckets, and although roll rates are relatively stable, they have not improved as much as they normally do in December, indicating that underlying credit stress remains elevated.

Adelson also highlights that net charge-offs in the on-balance sheet trusts have eased for a second consecutive month and modestly outperformed seasonal expectations, but the overall loss levels still support a more cautious stance than the market is pricing in. His projections for fourth-quarter GAAP net charge-offs are meaningfully higher than consensus and toward the upper end of management’s guidance range, suggesting investors may be underestimating credit costs. Taken together, the gradual stabilization in trends is encouraging but not strong enough to justify a more bullish call, leading him to maintain a Hold rating on the stock as risk and reward appear broadly balanced at current levels.

According to TipRanks, Adelson is an analyst with an average return of -10.1% and a 40.23% success rate. Adelson covers the Financial sector, focusing on stocks such as SLM, Navient, and Rocket Companies.