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Ally Financial (ALLY)
NYSE:ALLY

Ally Financial (ALLY) AI Stock Analysis

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AL

Ally Financial

(NYSE:ALLY)

Rating:63Neutral
Price Target:
$36.00
▼(-0.83%Downside)
Ally Financial receives an overall stock score of 63, reflecting operational and valuation challenges balanced by some strategic growth areas. The company's mixed financial performance, particularly in profitability and cash flow, weighs on the score. However, positive earnings call sentiment and growth in strategic areas like auto finance and digital banking provide offsetting strengths. The technical analysis suggests a stable trend without strong directional momentum, while high valuation metrics indicate potential overpricing.
Positive Factors
Credit Quality
Used car prices increased with tariffs, which should provide some support to credit quality.
Net Interest Margin
The path to improved returns becomes clearer as the path to 3.80% NIM is viewed as very attainable.
Retail Auto Loans
Retail auto loan losses were lower than expected in 1Q, but management reiterated its FY25 outlook.
Negative Factors
Downside Risk
There is a belief in downside risk particularly if book value and loan principal become the focus.
Earnings Expectations
There is concern that the earnings may not meet expectations, as the net interest margin misses guidance.
Financial Health
Ally sold $4.1 billion of securities for a $495m pre-tax loss, which does not seem to make sense or add value to Ally's economics.

Ally Financial (ALLY) vs. SPDR S&P 500 ETF (SPY)

Ally Financial Business Overview & Revenue Model

Company DescriptionAlly Financial Inc., a digital financial-services company, provides various digital financial products and services to consumer, commercial, and corporate customers primarily in the United States and Canada. It operates through four segments: Automotive Finance Operations, Insurance Operations, Mortgage Finance Operations, and Corporate Finance Operations. The Automotive Finance Operations segment offers automotive financing services, including providing retail installment sales contracts, loans and operating leases, term loans to dealers, financing dealer floorplans and other lines of credit to dealers, warehouse lines to automotive retailers, and fleet financing. It also provides financing services to companies and municipalities for the purchase or lease of vehicles, and vehicle-remarketing services. The Insurance Operations segment offers consumer finance protection and insurance products through the automotive dealer channel, and commercial insurance products directly to dealers. This segment provides vehicle service and maintenance contract, and guaranteed asset protection products; and underwrites commercial insurance coverages, which primarily insure dealers' vehicle inventory. The Mortgage Finance Operations segment manages consumer mortgage loan portfolio that includes bulk purchases of jumbo and low-to-moderate income mortgage loans originated by third parties, as well as direct-to-consumer mortgage offerings. The Corporate Finance Operations segment provides senior secured leveraged cash flow and asset-based loans to middle market companies; leveraged loans; and commercial real estate product to serve companies in the healthcare industry. The company also offers commercial banking products and services. In addition, it provides securities brokerage and investment advisory services. The company was formerly known as GMAC Inc. and changed its name to Ally Financial Inc. in May 2010. Ally Financial Inc. was founded in 1919 and is based in Detroit, Michigan.
How the Company Makes MoneyAlly Financial generates revenue through multiple channels. The company earns significant income from its automotive finance segment by providing loans and lease arrangements to consumers and dealerships. Ally also derives revenue from its online banking services, earning interest income on loans and fee income from deposit accounts. Additionally, the company offers insurance products, contributing to its earnings through premiums and related investment income. Mortgage services provide another revenue stream, with Ally originating and servicing mortgages for consumers. The company's diverse financial offerings and strong digital presence are key factors in its profitability, along with strategic partnerships with automotive manufacturers and dealers that enhance its market reach.

Ally Financial Earnings Call Summary

Earnings Call Date:Apr 17, 2025
(Q1-2025)
|
% Change Since: 12.80%|
Next Earnings Date:Jul 16, 2025
Earnings Call Sentiment Neutral
The earnings call highlighted strong growth in key areas such as auto finance and corporate finance, and emphasized the strength of the company's brand and digital bank. However, challenges such as the impact of the credit card business sale, elevated delinquencies in retail auto, and significant weather-related losses in insurance presented noteworthy concerns.
Q1-2025 Updates
Positive Updates
Record Application Volume in Auto Finance
Consumer originations in the auto finance business reached $10.2 billion, driven by 3.8 billion applications, marking the highest quarterly application volume ever.
Net Promoter Scores and Brand Strength
Ally's Net Promoter Scores are well ahead of industry averages, and positive brand social sentiment is nearly ninety percent, almost double compared to banking peers.
Strong Performance in Corporate Finance
Corporate finance delivered a strong quarter with pre-tax income of $76 million and a 25% ROE, ending the quarter with zero net charge-offs.
Growth in Insurance Premiums
Insurance written premiums increased by 9% year over year, supported by growth in P&C exposure and new relationships.
Digital Bank Customer Growth
The digital bank now serves 3.3 million customers, with balances reaching $146 billion at the end of the quarter, up nearly $3 billion quarter over quarter.
Negative Updates
Impact of Credit Card Business Sale
The sale of the credit card business resulted in a $495 million pre-tax loss related to securities repositioning and impacted the net interest margin.
Weather-Related Losses in Insurance
Net weather losses totaled $58 million, the highest first quarter of weather-related losses in Ally's history, primarily due to a three-day severe weather event.
Elevated Delinquencies in Retail Auto
Retail auto net charge-offs were 212 basis points, reflecting elevated delinquency levels, although there was a year-over-year improvement.
Lease Remarketing Losses
The company recognized $19 million in losses on lease remarketing due to mixed headwinds, although performance improved throughout the quarter.
Company Guidance
During the Ally Financial First Quarter 2025 Earnings Conference Call, leadership provided guidance on several key financial metrics. The company reported an adjusted earnings per share of $0.58 and a core pre-tax income of $247 million. Additionally, adjusted net revenue was stated at $2.1 billion, with a net interest margin of 3.35%, which increased by two basis points compared to the previous quarter. The call also highlighted that consumer originations in the auto finance business reached $10.2 billion, with originated yields of 9.8%. The deposit franchise was noted to serve 3.3 million customers, with total balances of $146 billion, up nearly $3 billion from the previous quarter. Lastly, corporate finance pre-tax income was $76 million, reflecting a 25% return on equity, while written premiums in the insurance segment increased by 9% to $385 million year over year.

Ally Financial Financial Statement Overview

Summary
Ally Financial's financial statements show mixed results. The income statement reveals stable gross profit margins but declining net profit margins and revenue, indicating operational challenges. The balance sheet is moderately leveraged with a decrease in ROE. Cash flow generation is strong relative to net income, but the decline in free cash flow is concerning. Overall, the company faces profitability and cash flow generation challenges, though it maintains reasonable financial stability.
Income Statement
65
Positive
Ally Financial's income statement shows a mixed performance. The trailing twelve months (TTM) gross profit margin is approximately 42.1%, which is stable, but there is a notable decline in net profit margin to about 1.8% from 4.1% in the previous year. EBIT and EBITDA margins have also decreased, indicating pressure on operational efficiency. Revenue has seen a decline, evidenced by a negative growth rate of -4.2% compared to the previous annual report, which could be a concern if the trend continues.
Balance Sheet
70
Positive
The balance sheet reflects a moderate financial position with some areas of concern. The debt-to-equity ratio stands at 1.4, indicating moderate leverage, which is acceptable but should be closely monitored. Return on Equity (ROE) has decreased to 2.0%, down from 4.8%, highlighting challenges in generating profit from shareholder investments. However, the equity ratio is stable at 7.4%, suggesting a reasonable portion of assets are financed by equity. Overall, the company's financial stability seems adequate, but improvements in profitability are needed.
Cash Flow
60
Neutral
Cash flow analysis exhibits some weaknesses. The operating cash flow to net income ratio is robust at 14.7, suggesting strong cash generation relative to net income. However, free cash flow has decreased significantly, with a negative growth rate of -40.8%, which could limit financial flexibility. The free cash flow to net income ratio is 2.2, indicating that free cash flow is lower compared to net income, a potential area for improvement. While cash flow generation remains, the decline in free cash flow should be monitored.
Breakdown
TTMDec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income StatementTotal Revenue
15.68B16.37B15.97B7.94B8.67B6.20B
Gross Profit
6.60B6.73B7.10B7.94B8.67B6.20B
EBIT
381.00M836.00M1.10B1.32B3.23B563.00M
EBITDA
1.63B2.04B2.33B3.56B4.94B2.55B
Net Income Common Stockholders
286.00M668.00M957.00M1.71B3.06B1.08B
Balance SheetCash, Cash Equivalents and Short-Term Investments
26.66B29.30B26.66B31.21B38.45B45.31B
Total Assets
196.39B191.84B196.33B191.83B182.35B182.16B
Total Debt
20.23B19.23B20.98B20.16B17.03B24.14B
Net Debt
13.29B8.94B14.04B14.59B11.97B8.52B
Total Liabilities
182.63B177.93B182.63B178.97B165.30B167.46B
Stockholders Equity
13.77B13.90B13.70B12.86B17.05B14.70B
Cash FlowFree Cash Flow
632.00M1.07B1.80B2.71B-1.08B-581.00M
Operating Cash Flow
4.20B4.53B4.56B6.25B4.04B3.74B
Investing Cash Flow
74.00M4.99B-7.18B-17.26B-11.10B8.43B
Financing Cash Flow
-1.49B-5.57B3.84B11.57B-3.85B25.00M

Ally Financial Technical Analysis

Technical Analysis Sentiment
Positive
Last Price36.30
Price Trends
50DMA
33.99
Positive
100DMA
35.47
Positive
200DMA
35.86
Positive
Market Momentum
MACD
0.44
Negative
RSI
60.66
Neutral
STOCH
87.17
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ALLY, the sentiment is Positive. The current price of 36.3 is above the 20-day moving average (MA) of 35.31, above the 50-day MA of 33.99, and above the 200-day MA of 35.86, indicating a bullish trend. The MACD of 0.44 indicates Negative momentum. The RSI at 60.66 is Neutral, neither overbought nor oversold. The STOCH value of 87.17 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for ALLY.

Ally Financial Risk Analysis

Ally Financial disclosed 42 risk factors in its most recent earnings report. Ally Financial reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks

Ally Financial Peers Comparison

Overall Rating
UnderperformOutperform
Sector (64)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
73
Outperform
$5.87B21.5817.24%13.77%20.95%
SYSYF
71
Outperform
$22.54B8.1318.60%1.77%1.22%4.96%
71
Outperform
$15.74B33.847.51%21.24%
OMOMF
68
Neutral
$6.35B11.2917.46%7.80%9.07%
SLSLM
66
Neutral
$6.75B11.5827.60%1.49%-0.70%-12.72%
64
Neutral
$12.85B9.817.59%16985.65%12.30%-7.71%
63
Neutral
$11.15B26.683.84%3.31%-2.99%-43.64%
* Financial Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
ALLY
Ally Financial
36.30
-1.39
-3.69%
CACC
Credit Acceptance
505.60
31.27
6.59%
SLM
SLM
32.16
11.75
57.57%
SYF
Synchrony Financial
59.22
15.73
36.17%
OMF
OneMain Holdings
53.35
8.12
17.95%
SOFI
SoFi Technologies
14.24
7.21
102.56%

Ally Financial Corporate Events

Executive/Board ChangesBusiness Operations and Strategy
Ally Financial’s Strategic Executive Transition Announcement
Neutral
Nov 26, 2024

Jason E. Schugel’s transition from Chief Risk Officer to Senior Operating Adviser at Ally Financial Inc. includes a comprehensive agreement ensuring his financial security and benefits until his departure by March 2025. The agreement outlines his compensation package, including a significant incentive plan, vested stock units, and a lump-sum payment, along with provisions for career transition support. This move reflects Ally’s strategic management adjustments and Schugel’s continued influence within the company, appealing to those tracking executive movements and corporate governance in the financial sector.

Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.