Umpqua (UMPQ) is a good bank in good long-term shape but in a tough near-term set-up. It’s no exaggeration to say that the Street is quite skeptical about large mergers of equals (or MOEs) and has generally taken a “show me” stance on the purported revenue and cost synergies; not an altogether unfair position given that some MOEs in the past have encountered outsized cultural integration issues and struggled to come through on the expected benefits.
I think the investment case around Umpqua right now revolves around your patience and time horizon. I think there’s double-digit long-term total annualized return potential at today’s price, but I’ve seen stocks undergoing MOEs stagnate for frustratingly long periods of time. If you’re a patient investor that doesn’t care as much about near-term performance, this may be a good opportunity, but do be aware that the Street may take some time to warm up to the long-term benefits of the deal and/or will likely do so on an unpredictable schedule.
Read the full article here:
Umpqua In Good Shape Long Term, But The Pending MOE Will Test Investor Patience
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