Friday, FBR Capital Markets upgraded Pennantpark Investment Corp. (PNNT) shares to Outperform from Market Perform and increased its price target to $10 from $4. The brokerage raised its 2009 EPS estimate to $1.06 from $0.98, and its 2010 estimate to $1.10 from $0.92.
Analyst Scott Valentin upgraded the stock to Outperform, reflecting its relatively better financial positioning than BDC peers, superior credit performance, and what he believes to be greater sustainability of the dividend.
The analyst increased his price target from $4 to $10, equating to roughly 80% of estimated book value and 9.6% yield, in line with better performing BDCs. While the outlook for commercial credit remains challenging, credit performance at PNNT has remained strong, reflecting the underweighting of 2005-07 vintage originations; only one investment is nonaccrual.
The analyst noted that with balance sheet capacity and liquidity, along with a comfortable cushion with regard to borrowing covenants, PNNT is taking advantage of attractive yields currently available in senior debt investments, providing support for the dividend.
Currently, PNNT is up $0.87 or 10.71% and trading at $8.99.
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