SLM's Loan Growth And Expense Control In Focus, Analysts Adjust Price Forecasts

Wall Street analysts raised their price targets on SLM Corp SLM after the company released its fourth-quarter print Thursday amid an exciting earnings season.

SLM’s fourth-quarter EPS of $0.50 missed the analyst estimate. The net interest income of $362.00 million missed the analyst estimate of $373.96 million.

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SLM expects fiscal 2025 EPS of $3.00-$3.10 versus $3.35 analyst estimate. It expects non-interest expenses of $655 million-$675 million.

Keefe, Bruyette & Woods analyst Sanjay Sakhrani maintained SLM with a Market Perform with a price target of $30.

RBC Capital analyst Jon G. Arfstrom reiterated an Outperform on SLM and raised the price target to $32 from $30.

JP Morgan analyst Richard Shane maintained SLM with a Neutral and raised the price target from $29 to $30.

Keefe, Bruyette & Woods: SLM reported core EPS of $0.50, which compares to Sakhrani’s estimate of $0.58. The miss to the analyst’s EPS estimate was driven by higher provision (-$0.15/share) and lower net interest income (-$0.01/share), partially offset by lower expenses (+$0.02/share) and a lower tax rate (+$0.06/share).

SLM reported a miss relative to Sakhrani’s expectations on higher provisions, while Pre-provision Net Revenue (PPNR) aligned with expectations. Core trends were mixed, with originations and the Delinquency (DQ) rate being better, PPNR and the net charge-off (NCO) rate being in line, and the Net interest margin rate being weaker. The company provided a 2025 outlook with EPS and loan origination growth better than Sakhrani’s expectations, while the NCO rate and expenses are in line.

RBC Capital: Core results were acceptable in a seasonally softer origination quarter. Highlights included substantial loan growth, some modest margin reduction, and a meaningful decrease in expense levels. Credit trends were more mixed with higher NCOs sequentially, though management remains hopeful that losses should continue to normalize lower in 2025 towards its longer-term loss range.

The 2025 outlook calls for solid origination growth and manageable expense levels. Further, the company plans to sell $2 billion in loans in the first quarter of 2025, which should support the updated EPS guide. Arfstrom’s thesis remains consistent, as he noted continued progress in the gradual shift toward a more balanced growth model. However, additional loan sales and buyback activity will likely continue over the near-to-medium term.

Arfstrom adjusted his 2025E EPS from $2.90 to $3.00 and his 2026E EPS from $3.20 to $3.40. The price target of $32 is ~10.5 times Arfstrom’s 2025 EPS estimate. The target primarily mirrors the analyst’s profitability and risk assessment of the company relative to a peer group of similar companies. The assumed multiple is consistent with a peer group of consumer finance-oriented operators.

JP Morgan: SLM reported GAAP and core EPS of $0.50, below Shane’s estimate of $0.57, and Street estimates of $0.55, driven by elevated provision expense. SLM provided 2025 guidance, which the analyst noted matches expectations.

However, balance sheet growth may exceed the company’s long-term framework of 5%-6% year-on-year, which could drive incremental reserve build in 2025. There were no loan sales in the fourth quarter of 2024, but the company announced a $2 billion loan sale in the first quarter of 2025, followed by additional loan sales in 2025.

Shane valued SLM based on a forward multiple of core earnings. In determining a December 2025 price target, he applied a multiple of 9.00 times (versus 8.75 times prior) on his 2026 core EPS estimate of $3.32 (versus $3.33 prior). The multiple reflects higher growth potential as SLM continues to take market share. The price target implies a 4.5% potential annualized total return.

Price Action: SLM stock is down 0.27% at $29.22 at last check Friday.

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