'Best-In-Class' Bridgewater Bancshares Has 20% Upside Potential, DA Davidson Says In Bullish Initiation

Bridgewater Bancshares Inc BWB recently offered 6.7 million shares in an initial public offering at $11.75 each.

The Analyst

D.A. Davidson analyst Kevin Reevey initiated coverage of Bridgewater with a Buy rating and a 12-18 month price target of $15.50, suggesting 20-percent upside potential.

The Thesis

Bridgewater shares should trade at a premium to peers given its above-average balance sheet growth, "best-in-class" operating metrics and footprint in the greater Twin Cities region, one of the most attractive Midwestern markets, Reevey said in a Monday note.

The net IPO proceeds of $58 million should provide the company the necessary capital to support continued balance sheet growth, both organically and to some extent through acquisitions, the analyst said.

As one of the top 10 banks in the Minneapolis-St. Paul region, Bridgewater has been growing market share through a combination of a strong balance sheet growth and taking advantage of market disruptions, Reevey said.

"The fourth quarter of 2017 was BWB's 48th consecutive quarter of profitability; Bridgewater has posted an average ROA and ROE of 1.31 percent and 16.5 percent over the last five years." 

The bank's credit quality is strong, according to D.A. Davidson. 

Potential risks projected by the sell-side firm include a lack of geographic diversity and exposure to commercial real estate.

The Price Action

Shares of Bridgewater have gained about 2.6 percent since their March 14 debut on Wall Street.

The stock was up 0.77 percent at the time of publication Monday. 

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