Morgan Stanley analyst Jeffrey Adelson maintained a Buy rating on SLM today and set a price target of $36.00.
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Jeffrey Adelson has given his Buy rating due to a combination of factors surrounding SLM’s strategic initiatives. The company has entered into a significant multi-year partnership with KKR, which involves KKR purchasing a substantial portfolio of SLM’s private student loans and committing to acquiring newly originated loans annually. This partnership not only provides SLM with a steady stream of recurring fees for servicing and program management but also marks the launch of a new, capital-light revenue stream.
Adelson believes that this strategic shift towards private credit partnerships will enhance SLM’s earnings over time. Although the initial revenue from these partnerships might be lower compared to current loan sales, the accumulated managed loan balances are expected to generate comparable or even higher revenues within a few years. This approach allows SLM to maintain economic interest in the loans, ensuring a more stable and consistent earnings per share (EPS) growth, which supports the Buy rating.
Adelson covers the Financial sector, focusing on stocks such as SLM, Rocket Companies, and American Express. According to TipRanks, Adelson has an average return of -11.7% and a 35.37% success rate on recommended stocks.