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EverBank Jumps on Oppenheimer Call as 'Meaningfully Undervalued'

NEW YORK ( TheStreet) -- Shares of EverBank Financial (EVER - Get Report) are "meaningfully undervalued," according to Oppenheimer analyst Terry McEvoy, who argues that the company's "business model and growth prospects remain unique in today's environment."

EverBank was jumping 3.4% in midday tradin, to $17.26, boosted in part from a  decline in the U.S. unemployment rate to 7.0% in November from 7.3% in October, that's generally lifting most stocks. The S&P 500 was gaining 0.9% to 1,801.56, extending the benchmark's 2013 advance to 26%.

EverBank is headquatered in Jacksonville, Fla., and has a national lending business as well offering investment and wealth management services which attract customers online and through several other channels. The company had $17.6 billion in total assets as of Sept 30. 

Some of EverBank's products have "more of an on-line appeal (i.e., mortgage banking and deposits)," according to McEvoy, "whereas management has identified specific markets where it is looking at expanding commercial lending (primarily large West/East Coast cities and Texas)."

McEvoy on Thursday initiated his firm's coverage of EverBank with an "outerform" rating and a 12-18 month price target of $21, implying 26% upside over Thursday's closing stock price of $16.70.

EverBank's shares have returned 14% this year through Thursday's close.  The shares trade for 1.5 times tangible book value, according to Thomson Reuters Bank Insight, and for 13 times the consensus 2014 earnings estimate of $1.29 a share. The consensus 2015 EPS estimate is $1.46.

Amid a continued bull run for bank stocks this year, EverBank's underperformance reflects "legitimate investor concerns over profitability pressure in the mortgage banking business," according to McEvoy.  These concerns are underlined by the latest forecast from the Mortgage Bankers Association, which is for total U.S. one-to-four family mortgage loan volume to decline from $1.755 billion this year to $1.180 billion in 2014.  Total Mortgage volume has already decline quite significantly from $2.044 trillion in 2012, according to the MBS.

But McEvoy is impressed with EverBank's relatively low-cost distribution model, loan portfolio that is diversified by type and location, as well as the company's "scalable on-line deposit/ mortgage platform has to some degree an 'on/off' switch to better match customer demand/preferences and management's targeted balance sheet growth."

"If a group of forward-thinking bankers sat down in a room today to write up a business plan for the bank of the future, it most likely would resemble EverBank," McEvoy wrote in a note to clients on Thursday.  He is out in front of the consensus, estimating EverBank will earn $1.35 a share in 2014, with EPS growing to $1.50 in 2015.

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