What Happened?
Shares of digital small business lender Live Oak Bancshares (NYSE: LOB) jumped 6.6% in the morning session after Keefe, Bruyette & Woods upgraded the stock and the company announced it expects to recognize a significant pre-tax gain from a deal involving one of its investments.
The analyst firm Keefe, Bruyette & Woods (KBW) raised its rating on Live Oak from Market Perform to Outperform and increased its price target to $43 from $37. KBW cited an expected improvement in credit performance and accelerating revenue trends, projecting high earnings per share growth for 2025 and 2026. Separately, Live Oak announced it anticipates a pre-tax gain of $20 million to $25 million from the acquisition of Apiture, Inc., a company in which it holds an investment. This deal will also stop future pass-through losses. Adding to the positive news, the bank's investment arm, Live Oak Ventures, invested in AI lending platform Cascading AI to help automate its loan processes.
After the initial pop the shares cooled down to $35.72, up 4.1% from previous close.
Is now the time to buy Live Oak Bancshares? Access our full analysis report here, it’s free.
What Is The Market Telling Us
Live Oak Bancshares’s shares are somewhat volatile and have had 14 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 18 days ago when the stock dropped 3.3% on the news that a surprisingly weak July jobs report and the announcement of sweeping new tariffs fueled fears of an economic slowdown and an impending interest rate cut. The U.S. economy added just 73,000 jobs in July, the weakest gain in over two years, while the unemployment rate rose to 4.2%. This dismal data significantly increased market expectations for a Federal Reserve interest rate cut, with traders now pricing in an 80% probability of a cut in September. Lower interest rates typically harm bank profitability by compressing their net interest margins—the difference between what they earn on loans and pay on deposits. Compounding these worries, the announcement of new tariffs on imports from 92 countries has sparked fears of a global trade war, which could further dampen economic growth and disrupt supply chains, creating a challenging environment for the banking industry.
Live Oak Bancshares is down 7.3% since the beginning of the year, and at $35.72 per share, it is trading 28.9% below its 52-week high of $50.22 from October 2024. Investors who bought $1,000 worth of Live Oak Bancshares’s shares 5 years ago would now be looking at an investment worth $1,833.
Here at StockStory, we certainly understand the potential of thematic investing. Diverse winners from Microsoft (MSFT) to Alphabet (GOOG), Coca-Cola (KO) to Monster Beverage (MNST) could all have been identified as promising growth stories with a megatrend driving the growth. So, in that spirit, we’ve identified a relatively under-the-radar profitable growth stock benefiting from the rise of AI, available to you FREE via this link.
