Back to top
We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties. You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies. In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Bear of the Day: Ally Financial (ALLY)
Ally Financial Overview
Zacks Rank #5 (Strong Sell) stock Ally Financial ((ALLY - Free Report) ) is a player in the online financial services sector that provides customers a range of banking and loan offerings. The company mainly focuses on auto loans, but its business extends to banking facilities, mortgages, investment options, and insurance coverage. ALLY is best known for providing top-notch service and cutting-edge technology solutions.
Deteriorating Credit Quality is a Headwind
The macroeconomic climate is a causing an issue for ALLY Financial, and the company anticipates that delinquencies will increase significantly (+7.4%) in the short term. Debt levels are reaching record highs in the United States, with the average consumer debt soaring to ~$37k.
Operating Expenses are Increasing
Mounting operating expenses will likely hurt Ally’s bottom-line growth. Over the past five years, the company’s expenses have recorded a compound annual growth rate (CAGR) of nearly 10%, driven by higher compensation and benefit costs.
Image Source: Zacks Investment Research
With several analysts tracked by Zacks revising earnings estimates lower for 2025, investors want to see costs dropping or at least staying relatively stagnant.
Image Source: Zacks Investment Research
With the company launching products and expanding into newer areas of operation, expenses are expected to remain elevated. Our estimate for total non-interest expenses reflects a CAGR of 2.4% by 2026.
Negative Earnings ESP Score
Zacks Earnings ESP (Expected Surprise Prediction) tracks the history of recent earnings revisions. A negative ESP score reveals the company has experienced negative recent analyst revisions. When a company has a negative ESP score and a Zacks Rank #3 or worse (like ALLY), it tends to miss earnings expectations and underperform its peers.
Relative Weakness
ALLY shares are exhibiting relative weakness compared to the S&P 500 Index. Year-to-date, the S&P has gained 24%, while ALLY shares have gained a futile 1.7%. Meanwhile, shares are carving out a classic bear flag chart pattern.
Image Source: Zacks Investment Research
Bottom Line
Increasing expenses and macro headwinds are reasons to avoid Ally Financial.