DA Davidson Downgrades First Business Financial Services Following YTD Rally

Following the year-to-date rally in First Business Financial Services Inc’s (NASDAQ: FBIZ), there seems to be limited upside to DA Davidson's price target, while the company's turnaround and earnings catalysts appear to be on track.

The Analyst

DA Davidson’s Kevin Reevey downgraded First Business Financial Services from Buy to Neutral, while maintaining the price target at $26.50.

The Thesis

Based on Monday’s closing price, First Business Financial Services’ shares have gained 28.1% year to date, outperforming the NASDAQ Bank Index, which has risen by 14.9%, Reevey said in the note.

He added that shares were trading almost 33% above their 52-week low and were less than 6% short of their 52-week high.

With First Business Financial Services beginning to benefit from its turnaround efforts, shares are gradually closing the forward price to tangible book value (P/TBV) gap versus its peers.

The company’s shares are trading at 117% of forward TBV versus 154% for its peers, the analyst mentioned, while adding that historically they have traded at wider levels.

Although the SBA segment has had a slow start in the first quarter, it could drive fee income and earnings growth in 2019. Reevey added that the company’s wealth management business is improving and could become “another key earnings catalyst.”

Price Action

Shares of First Business Financial Services declined 1% to $24.75 at time of publication.