On Friday, Piper Sandler reaffirmed its Overweight rating and $19.00 price target on shares of Newmark Group , Inc. (NASDAQ: NASDAQ:NMRK). The firm's positive outlook is based on the potential for the company to gain independence and simplify its structure following the nomination of Chairman Howard Lutnick as Commerce Secretary.
If confirmed, Lutnick has committed to stepping down from his roles at Newmark Group, BGC, and Cantor, and divesting his stake, although not through open market sales. This move is anticipated to place his stake into a trust.
The potential for Newmark Group to become independent was previously discussed by Piper Sandler in notes on November 6 and November 10, following the election. The firm believes that the company has experienced significant growth under CEO Barry Gosin since its initial public offering (IPO). Analysts suggest that there is limited reason to maintain a shared general counsel with BGC Partners (NASDAQ:BGC), Inc. (covered by another analyst named Moley).
The anticipated changes are seen as beneficial for Newmark Group, particularly as they would result in the removal of Lutnick's majority voting power and the complex structure currently in place. This could also mean that Newmark Group would no longer need to share its financial methodology with BGC Partners, offering a clearer and more streamlined operational approach.
The confirmation of Lutnick as Commerce Secretary and his subsequent resignation from Newmark Group could lead to a reevaluation of the company's structure and strategy. The firm's assessment indicates that there would likely be sufficient investor demand for Lutnick's shares, despite them not being sold on the open market.
In summary, Piper Sandler's reiteration of the Overweight rating and price target reflects an optimistic view of Newmark Group's potential for structural simplification and independence, which could enhance the company's appeal to investors and its overall market performance.
In other recent news, Newmark Group, Inc. has seen notable developments in its corporate landscape and financial performance. Executive Chairman Howard W. Lutnick has been nominated for the role of U.S. Secretary of Commerce, expressing intent to resign from his positions at Newmark, Cantor, and BGC. Newmark's leadership, under CEO Barry Gosin, is set to continue the company's current trajectory.
On the financial front, Newmark demonstrated robust growth in its third quarter of 2024. The company reported an 18% increase in capital markets revenues and a 77% rise in mortgage brokerage volumes. Total (EPA:TTEF) revenues reached $685.9 million, marking an 11.3% increase, while adjusted earnings per share rose by 22.2% to $0.33.
Newmark has set ambitious goals, aiming to double its management services and servicing revenues to over $2 billion within five years. The company also plans to expand its European presence, initiating operations in Germany and growing in the UK and France. However, the company revised its adjusted EBITDA guidance downward due to the treatment of legal settlements. These are among the recent developments that continue to shape the company's trajectory.
InvestingPro Insights
Complementing Piper Sandler's optimistic outlook on Newmark Group (NASDAQ: NMRK), recent data from InvestingPro provides additional context to the company's financial performance and market position.
The company's stock has shown remarkable strength, with a 90.79% price total return over the past year and a 43.11% return in the last six months. This aligns with the positive sentiment expressed in the article regarding potential structural changes and independence.
InvestingPro Tips highlight that Newmark Group is trading at a low revenue valuation multiple, which could be attractive to investors considering the company's growth prospects. Additionally, analysts predict the company will be profitable this year, supporting Piper Sandler's Overweight rating.
It's worth noting that Newmark Group's revenue growth stands at 12.15% for the last twelve months, with an EBITDA growth of 37.6% over the same period. These figures suggest solid financial performance, which could be further enhanced by the potential structural simplification discussed in the article.
For investors seeking a deeper understanding of Newmark Group's potential, InvestingPro offers 12 additional tips, providing a comprehensive analysis of the company's financial health and market position.
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