SLM Corp stock rating reiterated at Buy by TD Cowen amid delinquency concerns

SLM Corp. (NASDAQ:SLM) experienced a stock decline driven by market concerns over increased early-stage delinquencies in its July trust data and a significant Q2 2025 earnings miss, reporting $0.32 EPS against a $0.49 consensus and a surge in provision for credit losses to $149 million. Despite this, TD Cowen reiterated its Buy rating and $40 price target, arguing the market reaction was "overdone" as month-to-month variability is typical, late-stage loan performance remains robust, and the data is unlikely to signal broad consumer credit deterioration, with SLM maintaining its long-term charge-off projections.

Analysis

SLM Corp. is currently navigating conflicting signals, presenting a classic bull-bear debate. On the bearish side, the company reported a significant second-quarter 2025 earnings miss, posting an EPS of $0.32 against a $0.49 consensus, coupled with a dramatic surge in its provision for credit losses to $149 million from $17 million in the prior year's quarter. This was compounded by a recent stock decline triggered by an increase in early-stage delinquencies within its July trust data. However, the bullish counter-argument, led by TD Cowen, posits that the market reaction to the delinquency data was "overdone." The firm maintains a Buy rating and a $40 price target, arguing that month-to-month variability in trust data is normal, late-stage loan performance remains strong, and the data does not signal the start of broader consumer credit deterioration. This view is supported by SLM's management, which has maintained its long-term charge-off projection range of high-1% to low-2%, indicating internal confidence despite the near-term volatility. While InvestingPro data suggests the company is "fairly valued" with a P/E of 15.13, the analyst price target range of $35 to $44 implies significant upside from its current trading price of $30.56.

Key Decisions for Investors

• Investors should weigh the negative catalysts of a significant earnings miss and rising credit provisions against the analyst view that the market has overreacted to short-term delinquency data.
• Monitor subsequent monthly trust data closely to determine if the rise in early-stage delinquencies is a temporary anomaly or the beginning of a sustained negative credit trend that could challenge SLM's stable charge-off projections.
• Given the disconnect between the recent stock price and the reaffirmed $40 analyst target, opportunistic investors may view the current weakness as a buying opportunity, while more cautious investors might wait for evidence of stabilizing credit metrics before committing capital.