Today's Pick: 🏦 ALLY

💲 Business Model

Ally Financial Inc. is a digital financial-services company that provides various digital financial products and services to consumer, commercial, and corporate customers primarily in the United States and Canada. Its core products and services include automotive financing services, consumer finance protection and insurance products, consumer mortgage loan portfolio, senior secured leveraged cash flow and asset-based loans, leveraged loans, commercial real estate product, commercial banking products and services, securities brokerage and investment advisory services.

🚀 Growth Potential

• Launched of new digital banking platform, Ally Invest, which offers customers a range of investment products and services.

• Ally Bank's total deposits of $154 billion are up $13.9 billion year-over-year

• Nearly $20 billion of origination volume YTD puts ALLY on track to originate around $40 billion this year.

• ALLY has grown to 3 million deposit customers with strong growth amongst millennial and younger demographics

• Launched a new mobile banking app, and digital experiences which have seen strong adoption.

• Rebranding efforts for Ally's credit card offerings are on track to be completed at the end of the year

• Strong liquidity of $42.5 billion, representing 3.8 times uninsured deposit balances gives the business a great buffer against market uncertainty

⚖️ Intrinsic Value

ALLY is currently trading at $29.46.

Best Case:

• 🟢 Intrinsic Value: $138.52 Undervalued by 79%

• 🟢 DCF Value: $218.76 Undervalued by 87%

• 🟢 Relative Value: $58.28 Undervalued by 49%

• 🟢 Analyst Targets: ALLY has upside potential of 9% compared to the average analyst price target.

Worst Case:

• 🟢 Intrinsic Value: $47.98 Undervalued by 38%

• 🟢 DCF Value: $49.43 Overvalued by 40%

• 🟢 Relative Value: $46.52 Undervalued by 37%

☎️ Earnings Call Q2 2023 (July 19, 2023):

• The company reported adjusted EPS of $0.96 and revenues of $2.1 billion, indicating their ability to execute in a dynamic operating environment.

• Net interest margin of 3.4% was generally in line with their expectations as they continue to absorb the impacts of rapidly rising short-term interest rates.

• Retail deposits were up nearly $0.5 billion despite seasonal headwinds related to tax payments and other factors pressuring deposit flows. Insured balances increased $1.3 billion in the quarter and now represent 92% of the portfolio.

• Total available liquidity of $42.5 billion was effectively flat quarter-over-quarter and is equivalent to 3.8 times their uninsured deposit balances.

• Within Auto Finance, 3.5 million applications powered them to generate $10.4 billion of originations at attractive risk-adjusted returns. Net charge-offs in the quarter were 132 basis points, which was down from the prior quarter, but was slightly elevated relative to expectations.

• Within insurance, they continue to successfully grow and deepen dealer relationships as $299 million of written premiums were up 14% year-over-year.

• Total deposits of $154 billion are up $13.9 billion year-over-year as they continue to grow their deposit customer base now approaching $3 million.

• They have over 1 million active credit card holders and remain excited about long-term opportunities for this business.

• Corporate Finance continues to deliver accretive disciplined growth is nearly 100% of the $10.1 billion portfolio is in a first-lien position.

📰 Recent News

[20 Jul 2023] Ally Financial (ALLY) Stock Rises 5.4% on Q2 Earnings Beat

Sentiment: 🟡 Neutral

Ally Financial (ALLY) reports a rise in GAAP net revenues and other revenues in the second quarter of 2023. However, higher expenses hurt the results to some extent.

[19 Jul 2023] Compared to Estimates, Ally Financial (ALLY) Q2 Earnings: A Look at Key Metrics

Sentiment: 🟢 Positive

The headline numbers for Ally Financial (ALLY) give insight into how the company performed in the quarter ended June 2023, but it may be worthwhile to compare some of its key metrics to Wall Street estimates and the year-ago actuals.

[19 Jul 2023] Buy Ally Financial Before Mr. Market Realizes He Has Been Too Pessimistic 

Sentiment: 🟢 Positive

ALLY Financial reported strong Q2 results with adjusted EPS of $0.96 and revenues of $2.1B, despite the current economic uncertainty and inflation. The company is leveraging technology to attract deposits and expand into additional banking products. The company is seeing increased opportunities in the Auto Finance market as competitors pull out, with $10.4B of originations in Q2. ALLY's balance sheet also benefits from $60B of floating rate exposure across its commercial loan and hedging portfolios. Despite economic uncertainty and potential higher capital requirements, ALLY's deposit base is healthy and dominated by insured deposits.