NEW YORK (TheStreet) --Ally Financial (ALLY) - Get Report was upgraded to "outperform" from "neutral" at Credit Suisse on Wednesday morning. The firm also upped its price target on the stock to $27 from $25.
Credit Suisse said it raised its rating on the financial services company as Ally Financial is seeing better loan growth.
The upgrade comes on the heels of the company's better than expected 2015 second quarter earnings results.
"We upgrade shares of Ally Financial...due to our expectations for better loan originations (+58% y/y expansion in the "growth" channel and +37% y/y growth at Chrysler in 2Q), stronger capital return (management could retire the remaining series G preferreds before 2016 CCAR, which likely means strong dividends and share repurchases post 2016 CCAR), as well as benefits from booking more non-prime assets at the bank ($0.05- $0.07/shr for each 5% of originations booked at the bank) and diminishing liability sensitivity, all of which benefit profitability," Credit Suisse said in an analyst note.
Shares of Ally Financial closed at $22.47 on Tuesday afternoon.
Separately, TheStreet Ratings team rates ALLY FINANCIAL INC as a Sell with a ratings score of D-. TheStreet Ratings Team has this to say about their recommendation:
"We rate ALLY FINANCIAL INC (ALLY) a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself, generally high debt management risk, weak operating cash flow and feeble growth in its earnings per share."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The share price of ALLY FINANCIAL INC has not done very well: it is down 6.40% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
- The debt-to-equity ratio is very high at 4.53 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.
- Net operating cash flow has significantly decreased to $247.00 million or 73.49% when compared to the same quarter last year. Despite a decrease in cash flow ALLY FINANCIAL INC is still fairing well by exceeding its industry average cash flow growth rate of -97.59%.
- ALLY FINANCIAL INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, ALLY FINANCIAL INC turned its bottom line around by earning $84.79 versus -$457.00 in the prior year. For the next year, the market is expecting a contraction of 97.7% in earnings ($1.98 versus $84.79).
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. In comparison to the other companies in the Consumer Finance industry and the overall market, ALLY FINANCIAL INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- You can view the full analysis from the report here: ALLY Ratings Report