What Do Atlanticus’ Newly Added Risk Factors Tell Investors?

Atlanta-based Atlanticus Holdings (ATLC) provides financial technology solutions to financial services companies. Its solutions help lenders offer credit to American consumers. (See Analysts’ Top Stocks on TipRanks)

Let’s take a look at the company’s latest financial performance and newly added risk factors.

Q2 Financial Results

Atlanticus reported revenue of $179.5 million for Q2 2021. That compared to $135.4 million in the same quarter last year and exceeded the consensus estimate of $154.34 million. It posted EPS of $1.56 versus $0.93 in the same quarter last year and beat the consensus estimate of $1.42.

Atlanticus raised $70 million through stock sales during Q2 to boost its liquidity. It ended the quarter with $265.9 million in cash. (See Atlanticus Holdings stock charts on TipRanks).

Risk Factors

Atlanticus carries a total of 44 risk factors, according to the new TipRanks Risk Factors tool. Since Q4 2020, the company has updated its risk profile to introduce six new risk factors and remove three old ones. All of the company’s newly added risk factors relate to fundraising via its issuance of Series B preferred stock.

Atlanticus has issued some Series B preferred stock to enhance its liquidity. It tells holders of the preferred stock that they have extremely limited voting rights.

The company tells investors that it may issue additional Series B preferred stock in the future. It goes on to warn that such issuances could reduce its ability to pay dividends on its common stock.

Atlanticus cautions holders of its Series B preferred stock that they may be ineligible for preferential tax rates under qualified dividend income.

The company has dropped the risk factor that warned that the COVID-19 pandemic may adversely affect its access to capital.

The majority of Atlanticus’ risk factors fall under the Finance and Corporate category, with 45% of the total risks. That is below the sector average of 59%. The company’s stock price has gained about 167% year-to-date.

Analysts’ Take

B.Riley Financial analyst Steve Moss recently reiterated a Buy rating on Atlanticus stock and raised the price target to $67 from $63. Moss’ new price target suggests 2.01% upside potential. The analyst noted that bank earnings in Q3 may be similar to Q2 results amid low credit costs and rising deposits. However, the analyst thinks banks’ interest margins may continue to come under pressure because of high industry liquidity.

Consensus among analysts is a Moderate Buy based on 2 Buys. The average Atlanticus Holdings price target of $74.50 implies 13.43% upside potential to current levels.