Stock Markets
Navigating Private Equity as backdrop improves
Investing.com — Private equity, which faced challenges amid the economic downturn and elevated interest rates since 2022, is showing signs of stabilization and recovery.
As per Wells Fargo analysts, the sector is navigating this turbulent environment by focusing on more selective investments and secondary strategies, creating pathways for future growth as the macroeconomic outlook improves.
The private equity landscape has faced headwinds that led to extended timelines for fundraising, dealmaking, and exits.
In 2024, the median time to raise funds lengthened to 18 months, compared to 11 months just two years ago.
Additionally, the holding period for private equity exits has stretched to a median of seven years, reflecting the cautious pace fund managers adopted while markets were under pressure.
This slow pace, however, has also allowed firms to recalibrate their strategies and position themselves for long-term growth.
One major shift has been the growing reliance on secondary markets, where fund managers can return capital to investors through alternative liquidity channels.
Simultaneously, companies have focussed on allocating capital to high-quality companies with established business models, demonstrating a clear focus on “quality over quantity.”
Investors, too, are increasingly selective, gravitating toward experienced managers with proven expertise and reliable networks in an effort to mitigate risk.
Certain segments of private equity have outperformed others during the downturn. Buyout strategies, particularly in the small- and mid-cap space, are recovering faster than venture capital.
In the first three quarters of 2024, buyout deal and exit values climbed 24% and 14% respectively, compared to the same period last year.
Venture capital, in contrast, has struggled under the weight of high interest rates, public market volatility, and geopolitical concerns, resulting in declining valuations and subdued activity.
Wells Fargo analysts also flag the increasing appeal of small- and mid-cap buyout deals. These investments, which typically require less debt financing, have become more accessible despite tighter credit conditions.
Additionally, middle-market companies, the common targets of these strategies, offer more attractive valuations than larger firms.
Growth equity strategies have also gained traction, as they rely on smaller capital commitments and focus on companies with proven business models, reducing exposure to speculative risk.
Wells Fargo expects private equity to regain momentum, driven by expectations of easing monetary policy and improved economic conditions in 2025.
The Federal Reserve’s potential shift toward interest rate cuts, combined with a forecast for higher economic growth, should help unlock more investment opportunities and catalyze private equity’s recovery.
Another area poised for growth within the sector is artificial intelligence.
Private equity managers are increasingly drawn to AI-related ventures, anticipating that advancements in this field will create robust opportunities for investment and expansion over the next several years.
This focus aligns with broader market trends, suggesting that private equity will play a critical role in fueling innovation and growth across industries.
While the challenges of the past two years have reshaped the private equity landscape, they have also underscored the sector’s resilience.
Investors and fund managers alike are adopting more cautious, strategic approaches to capital deployment.
The sector may not be the top performer in the short term, but Wells Fargo analysts remain optimistic about its potential for long-term asset appreciation.
On Monday, Keefe, Bruyette & Woods made an adjustment to the price target for MetroCity Bankshares Inc. (NASDAQ: NASDAQ:), raising it to $34 from the previous $32 while maintaining a Market Perform rating on the stock.
The firm’s decision follows MetroCity Bankshares’ consistent demonstration of leading profitability and robust capital levels across various market cycles. The bank’s forward-looking performance indicators are expected to remain strong, with a return on assets (ROA) forecast at 1.8%, return on tangible common equity (ROTCE) at 15%, and an anticipated growth from 11% in the third quarter over the next two years.
MetroCity Bankshares is currently trading at a premium compared to its peers, with a tangible book value (TBV) multiple of 1.9 times versus the 1.5 times median for small to midsize (SMID) banks. This premium reflects the bank’s favorable position and the market’s positive reception of its financial health and growth prospects.
The price target increase also takes into account a slight outperformance in the third quarter of 2024, where MetroCity Bankshares exceeded expectations by $0.01 per share. Despite this beat, the firm’s estimates for the bank’s financial performance remain largely unchanged.
The analyst from Keefe, Bruyette & Woods highlighted the bank’s strong outlook, stating, “MCBS has generated leading profitability while maintaining strong levels of capital through different parts of the cycle. We see this continuing as we look through 2026 with ROA at 1.8%, ROTCE at 15%, and building from 11% in Q3 over the next 2 years.” This view underpins the rationale for the revised price target, signaling confidence in MetroCity Bankshares’ trajectory for the coming years.
In other recent news, MetroCity Bankshares, Inc. has added a new member to its Board of Directors, Mr. John Paek. He is set to bring a vast array of experience to the board, with a professional history that includes roles at Deloitte Tax LLP and Baker McKenzie LLP. Despite his impressive qualifications, it’s been noted that Mr. Paek does not meet the independence criteria under NASDAQ’s listing rules, due to his familial connection to the company’s leadership.
Mr. Paek will join the Asset Liability Committee, the Credit Risk Management Committee, and the Directors’ Loan Committee of the Bank. As for his remuneration, he will receive the same compensation as his fellow board members, as outlined in the company’s Definitive Proxy Statement filed earlier this year.
InvestingPro Insights
Recent data from InvestingPro reinforces Keefe, Bruyette & Woods’ positive outlook on MetroCity Bankshares Inc. (NASDAQ: MCBS). The company’s P/E ratio of 12.94 and PEG ratio of 0.76 suggest that the stock may be undervalued relative to its earnings growth potential, aligning with the bank’s premium trading position noted in the article.
InvestingPro Tips highlight MCBS’s strong financial performance, including its high return over the last year and decade, which corroborates the analyst’s expectations of continued profitability. The company’s dividend growth of 27.78% and a current dividend yield of 2.9% further underscore its financial health and shareholder value creation.
The bank’s revenue growth of 11.66% over the last twelve months and an impressive 33.58% quarterly growth support the article’s projection of continued growth. Moreover, the operating income margin of 60.93% reflects the leading profitability mentioned by the analyst.
For investors seeking a deeper understanding of MCBS’s potential, InvestingPro offers 7 additional tips, providing a comprehensive analysis of the company’s financial position and market performance.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.
Recognition is a testament to Avangrid (NYSE:)’s commitment to sustainability and dedication to advancing the clean energy transition
ORANGE, Conn.–(BUSINESS WIRE)–Avangrid, Inc. (NYSE: AGR), a leading sustainable energy company and member of the Iberdrola (OTC:) Group, was recently named to the Newsweek list of America’s Greenest Companies 2025, which recognizes the top 500 U.S. companies for advancements in managing their sustainability footprint.
Companies were evaluated and scored on over 25 parameters across the following four categories: greenhouse gas emissions, water usage, waste generation, and sustainability data disclosure and commitments.
At Avangrid, we pride ourselves on being a leading sustainable company and I am proud to see that reflected in this latest report from Newsweek, said Pedro Azagra, Avangrid CEO. By committing to industry-leading sustainability goals, we are advancing safe and affordable clean energy strategies that help responsibly advance society and strengthen the communities we serve.
Avangrid’s overall success is dependent creating a clean energy future for all. To achieve this, the Company is investing in the reliability and resiliency of its network infrastructure, increasing its generation capacity of renewable energy, and innovating across its operations to create positive outcomes for customers, communities, and the environment.
Our focus on sustainability is core to every decision we make, said Laney Brown, Vice President of Sustainability at Avangrid. As one of the greenest companies in the country, we are dedicated to helping solve critical issues like climate change and protecting biodiversity.
Avangrid has an ambitious carbon neutrality implementation strategy that is aligned with Iberdrola’s SBTi (Science Based Target initiative) goal. Avangrid’s goal is to achieve carbon neutrality for Scope 1 and 2 emissions by 2030.
Newsweek partnered with Plant-A Insights and GIST Impact to highlight U.S. companies committed to reducing their environmental impact. The ranking is determined through a comprehensive analysis of data from both public and private companies operating in the U.S. To ensure the highest standards, only companies that meet the European Union’s stringent sustainability criteria”considered the most advanced globally”were eligible.
This recognition from Newsweek comes on the heels of several other top awards for Avangrid in 2024 related to climate change and sustainability, including being named one of America’s Climate Leaders by USA Today, Climate Change Project of the Year by the Environmental Business Council of New England, and being recognized as the top utility on the 2024 JUST 100 list published by JUST Capital and CNBC.
About Avangrid: Avangrid, Inc. (NYSE: AGR) aspires to be the leading sustainable energy company in the United States. Headquartered in Orange, CT with approximately $45 billion in assets and operations in 24 U.S. states, Avangrid has two primary lines of business: networks and renewables. Through its networks business, Avangrid owns and operates eight electric and utilities, serving more than 3.3 million customers in New York and New England. Through its renewables business, Avangrid owns and operates a portfolio of renewable energy generation facilities across the United States. Avangrid employs approximately 8,000 people and has been recognized by JUST Capital as one of the JUST 100 companies “ a ranking of America’s best corporate citizens “ in 2024 for the fourth consecutive year. In 2024, Avangrid ranked first among utilities and 12 overall. The company supports the U.N.’s Sustainable Development Goals and was named among the World’s Most Ethical Companies in 2024 for the sixth consecutive year by the Ethisphere Institute. Avangrid is a member of the group of companies controlled by Iberdrola, S.A. For more information, visit www.avangrid.com.
View source version on businesswire.com: https://www.businesswire.com/news/home/20241021546555/en/
Media:
Keaton Thomas
Keaton.thomas@avangrid.com
503-956-9621
Source: AVANGRID, Inc.
DETROIT (Reuters) – Lucid (NASDAQ:) CEO Peter Rawlinson said on Monday that a stock sale announced last week will provide the electric luxury sedan maker with a “cash runway well into 2026.”
Rawlinson said in an interview on the sidelines of a Reuters Next event that the stock sale, which raised about $1.67 billion, “serves to support the future of the company long term” as it prepares to begin building its Gravity SUV in the coming months.
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