Mortgage Market Trough Likely To Benefit Equifax, Analyst Upgrades Stock

BofA Securities analyst Heather Balsky upgraded the shares of Equifax Inc EFX from Underperform to Buy and raised the price target from $164 to $300.

The stock is up 40% (versus the S&P +11%) since the November 1 Fed meeting, but the analyst sees room to go higher on positive EPS revisions. 

Shares are trading at 21x the analyst’s 2025E EPS, but have traded at 24x on average over the last 5 years and as high as about 32x.

The revised $300 price target assumes the multiple expands 6x to 27x as EPS re-rates higher and more investors hone-in on 2025’s profitability potential, says the analyst.

Alse See: Equifax Named Top Pick For 2024 By Needham, Price Target Raised On Expected Mortgage Rate Tailwinds

The analyst assumes 2024/25 mortgage originations and inquiries increase 9/16% and 15/20%, respectively, as Treasury rates and mortgage spreads ease. 

The analyst’s Structured Finance team sees a likely scenario where mortgage rates fall from 2023’s >7% to 6.0% by 2024 year-end.

Assuming a 6.4% average rate, the team estimates 2024 originations could rise 16-18%.

The analyst says EFX is positioned for positive EPS revisions over the next 24 months. This should boost investor enthusiasm after a series of mortgage-driven negative revisions in 2022-2023.

EFX gaining wallet share through its USIS cloud transformation over the next two years could provide incremental upside, notes the analyst.

Price Action: EFX shares are trading higher by 3.73% at $245.85 on the last check Monday.

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