Analyst Moshe Orenbuch of TD Cowen maintained a Hold rating on Nelnet (NNI – Research Report), boosting the price target to $96.00.
Moshe Orenbuch has given his Hold rating due to a combination of factors that suggest Nelnet’s performance is stable, yet not compelling enough for a more bullish stance. Orenbuch acknowledges that Nelnet’s first-quarter earnings exceeded expectations due to higher net interest income, fee income, and lower operating expenses. He has adjusted the price target upwards, yet maintains a Hold rating, indicating that while the quarterly results were positive, they may not be indicative of a significant growth trend that would warrant a stronger buy recommendation.
The Hold rating also considers the challenges and uncertainties facing Nelnet, such as the accelerated runoff of FFELP loans and the potential variability in operating expenses. Despite a beneficial increase in the core loan spread, the future pace of loan prepayments remains a question mark. Orenbuch notes Nelnet’s increase in share buybacks, which demonstrates a commitment to returning value to shareholders, but this activity alone does not shift his position to a more aggressive rating. Concerns about operating expenses, particularly with the new government servicing contract, contribute to the caution embedded in the Hold rating.
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Nelnet (NNI) Company Description:
Nelnet, Inc. engages in the provision of education-related products and services, as well as loan asset management. It operates through the business following segments: Loan Systems & Servicing, Education Technology, Services and Payment Processing, Communications, and Asset Generation and Management. The System & Servicing segment specializes in student loan portfolio and the portfolios of third parties such as loan conversion activities, application processing, borrower updates, customer service, payment processing, due diligence procedures, funds management reconciliations, and claim processing. The Education Technology, Services and Payment Processing segment provides products and services to help students and families manage the payment of education costs at all levels, as well as school information system software for private and faith-based schools that help schools automate administrative processes such as admissions, scheduling, student billing, attendance, and grade book management. The Communications segment is the operation of Allo Communications LLC which provides pure optic service to homes and businesses for internet, broadband, television, and telephone services. The Asset Generation & Management segment is the acquisition, management, and ownership of student loan assets. The company was founded by Michael S. Dunlap and Stephen F. Butterfield in 1977 and is headquartered in Lincoln, NE.
