Trump Watch: Jefferies sees possible 'Trump boost' for student lenders

Research firm Jefferies initiated coverage of the major student loan companies Wednesday, arguing that the sector's already-favorable macroeconomic environment could be lifted further by President-elect Donald Trump. JEFFERIES SEES FAVORABLE ENVIRONMENT FOR STUDENT LENDERS: Jefferies analyst John Hecht and team initiated coverage on student lending firms, starting Sallie Mae (SLM) with a Buy rating and Navient (NAVI) with a Hold. Student loan debt is the largest U.S. consumer lending segment outside of mortgages and Hecht estimates a 5% "base case" for private student loan growth, a figure which he says could even be conservative in light of ongoing changes to federal lending and rising college costs. In addition to a "supportive" macroeconomic backdrop and universally improving credit metrics in private student debt, Hecht also argues that President-elect Trump and his incoming administration "may provide a boost" to the sector. The analyst reminds investors that Trump's various proposals include more generous income-based repayment systems, adding that he could also attempt to allow private banks to issue Federal student loans. Hecht argues that Sallie is an "ideal investment" to capture the above-mentioned secular trends. While he considers Navient a "strong company," the recent stock rally has converged its equity pricing with his valuation model. The analyst assigns a $12.50 price target on Sallie Mae shares. PRICE ACTION: Shares of SLM Corp are up 5% to $11.34, while Navient is up 2%. Nelnet (NNI), another player in the space, has climbed 2.5% to $53.09 in afternoon trading. "Trump Watch" is The Fly's recurring series of exclusive stories that highlight stocks that are being impacted, or are predicted to be impacted, by the comments, actions and policies of President-elect Trump and his administration.