Stephens analysts adjusted their ratings for several financial services stocks in a note Tuesday. The firm upgraded American Express (NYSE:AXP) to Equal-Weight from Underweight, Aaron's (NYSE:AAN), PROG Holdings Inc (PRG), and Upbound Group (UPBD) to Overweight from Equal-Weight and downgraded America's Car-Mart (NASDAQ:CRMT) to Equal-Weight from Overweight and Navient (NASDAQ:NAVI) to Underweight from Equal-Weight.
Overall, the firm said it likes subprime consumer lenders and the Lease-To-Own players. "Lower interest rates are an absolute positive for subprime lender margins," wrote analysts.
"We expect subprime volumes and risk-adjusted margins to improve in 2024 regardless of 'soft landing,'" they added. The firm also likes banks with fixed-rate, long-duration assets.
When it comes to areas it dislikes, the firm said credit cards. This is because they believe NIM should compress alongside falling interest rates. Stephens also dislikes fintech as the "recent rallies imply cheap funding liquidity drives massive volumes, when credit is the fundamental driver for lender poor performance."