Wall Street is an “it’s always something” kind of place, and I wouldn’t expect sell-side analysts who were bearish on Bank OZK (OZK) to simply abandon that position just because the credit story is shaping up far better than the bear-case scenarios bandied about in mid-2020. Given where we’re at in terms of the pandemic and the impact it has had (is having, and will have) on real estate categories like hospitality and offices, it is fair to wonder whether loan growth will be the next focus of more bearish theses.
With these shares up more than 60% from when I last wrote about them, making Bank OZK a relative stand-out, I certainly don’t see the upside I once did. Credit is holding up better than I expected (I wasn’t bearish, but I was cautious), and that helps future earnings growth, but I think a near-term fair value around $40 with longer-term annualized total return potential close to 10% is a reasonable assessment of the opportunity here. I would note, though, that Bank OZK has meaningful under-used capital, and effectively deploying that could meaningfully improve the outlook.
Read more here:
Bank OZK Proving Out Its Credit Quality, But Loan Growth Concerns Loom
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