Core Viewpoint - Ally Financial is facing rising loss ratios due to increased delinquencies and net charge-offs in its consumer automotive loans, leading to a significant drop in its stock price, which fell nearly 20% to around 33aftertheannouncement[1][3]Group1:FinancialPerformance−Delinquenciesandnetcharge−offsforAlly′sautomotiveloansincreasedby10to20basispointsinJulyandAugust,translatingtoariseofapproximately0.12.5 billion in 2021 to 823millioninthepast12monthsduetoshort−termheadwindsfromrisinginterestrates[6]Group2:BusinessModelandLong−termOutlook−Despiterecentchallenges,Ally′sbusinessmodelremainsstrong,withatotalof142 billion in retail deposits and a consistent history of profitability, having never posted an annual net loss in the past decade [5] - The company added 54,000 depositors last quarter, bringing the total to 3.2 million, which supports its ability to continue making automotive loans [5] - Management indicated that the company would still be profitable if recent trends persisted, suggesting that the current issues may be a short-term blip rather than a long-term trend [4] Group 3: Investment Considerations - Ally's stock is currently trading at a price-to-earnings (P/E) ratio of 14.6, which is about half of the S&P 500 index's average, indicating potential undervaluation [6] - If Ally's annual net earnings revert back to the 1billionto2 billion range, its P/E could fall to 10 or lower, presenting a buying opportunity for long-term investors [6] - The recommendation is to consider buying the dip on Ally stock, as it appears to be undervalued and has the potential for recovery in the long term [7]
Ally(ALLY) The Motley Fool·2024-09-18 11:00