Piper Sandler Potential To Outperform Peer Growth Is Limited: Analyst

Piper Sandler Companies (NYSE:PIPR) is poised to benefit from accelerating M&A activity, especially in the U.S. banking sector, but has limited potential for outsized earnings growth, analysts say.

The Piper Sandler Companies Analyst: BofA Securities analyst Ebrahim Poonawala initiated coverage with an Underperform rating and price target of $385.

The Piper Sandler Companies Thesis: The company's core franchise is skewed towards smaller-cap deals and has less exposure to tech, which could "limit potential for outsized EPS growth vs. peers," Poonawala said in the initiation note.

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Piper Sandler Companies ranks second on deals announced with a value of less than $1 billion and last among boutique investment banks on average deal size of $1.6 billion, versus the peer average of $3.9 billion, he added.

While the strategy of focusing on smaller deals is good for incremental growth, it limits the company's ability to generate growth higher than peers, the analyst stated.

The stock currently trades at multiples in line with peers, despite Piper Sandler's below-peer-average earnings growth and a higher PEG (price/earnings-to-growth) ratio, he added.

PIPR Price Action: Shares of Piper Sandler Companies had declined by 1.52% to $354.89 at the time of publication on Monday.

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