After a 20% decline YTD, lower sales expectations and convertible tender dilution issues are baked into the stock, says FBR, upgrading American Equity Investment Life (AEL) to Outperform with $25 price target.
Analyst Randy Binner notes valuation - which peaked earlier this year at 11.5x 2015 EPS estimates and 1.4x book value - is back to 8.2x EPS and 1.1x book.
"We remain bullish on growth prospects for the indexed annuity product, which is AEL's specialty, as it still comprises only 15% of industry annuity sales. AEL's entrance into the broker/dealer channel for the first time could materially augment sales this year and serve as a new sales contributor as indexed annuity distribution evolves."
Shares rose 4.2% yesterday amid the upgrade