Last Update 16 Dec 25

Fair value Increased 1.10%

ALLY: Improving Credit Trends And Buybacks Will Shape A Measured Upside Path

Analysts have nudged their price target on Ally Financial modestly higher, with fair value rising by about $0.53 to approximately $48.59 per share as they factor in slightly stronger revenue growth, marginally better profit margins, and improving credit dynamics supported by recent research commentary.

Analyst Commentary

Recent Street research presents a generally constructive outlook on Ally Financial, with most firms highlighting improving credit trends, supportive rate dynamics, and the potential for earnings upside, even as some near term execution risks and modest estimate cuts temper enthusiasm.

Bullish Takeaways

Bullish analysts argue that improving credit performance in auto lending, particularly if higher used vehicle prices reduce loss severities, can support better than expected returns on equity and justify higher valuation multiples.
Several firms point to a more favorable macro backdrop, including moderating interest rates and stabilizing consumer credit, as reducing downside risk to earnings and supporting a higher long term earnings power framework into 2027.
Short term upside is seen in the next 90 days, with some research suggesting that recent worries tied to readthrough from peers are overdone, and that Ally’s retail auto loan growth and credit trends should prove more resilient.
Rising price targets from major institutions such as JPMorgan and Morgan Stanley reflect increased confidence in management’s ability to execute on growth initiatives and manage credit through the cycle, supporting a path to re rating toward the mid to high $40s and beyond.

Bearish Takeaways

Bearish analysts remain cautious on near term earnings delivery, with at least one preview note signaling a potential small miss relative to consensus, which could limit multiple expansion until execution against quarterly targets improves.
There is concern that slower hiring and a still uneven macro environment could cap loan growth and pressure fee income, leading to a more modest earnings trajectory than implied by the most optimistic price targets.
Some research continues to flag sector level risks in consumer finance, including sensitivity to economic slowdown and regulatory scrutiny, which may warrant a valuation discount versus historical peaks even as fundamentals improve.
While upside scenarios are acknowledged, more cautious views suggest that much of the near term good news on credit normalization and rates may already be reflected in the stock, constraining additional re rating without clear incremental catalysts.

What's in the News

Ally Financial Inc. (NYSE: ALLY) announced a new share repurchase program authorizing the company to buy back up to $2 billion of its common stock, with no stated expiration date. The program signals confidence in capital strength and long term earnings power (company announcement).
The Board of Directors approved the $2 billion share repurchase plan on December 9, 2025, providing management flexibility to return capital to shareholders over time while managing regulatory and balance sheet considerations (company announcement).
Ally Financial was removed from the FTSE All World Index (USD), a change that could influence passive fund ownership levels and near term trading flows in the stock (index provider update).

Valuation Changes

Fair Value: Risen slightly from approximately $48.06 to about $48.59 per share, reflecting modestly stronger fundamentals.
Discount Rate: Fallen slightly from roughly 11.73 percent to about 11.42 percent, indicating a marginally lower perceived risk profile.
Revenue Growth: Increased marginally from around 10.50 percent to approximately 10.53 percent, suggesting a slightly higher long term topline outlook.
Net Profit Margin: Edged up from about 18.20 percent to roughly 18.21 percent, pointing to a small improvement in expected profitability.
Future P/E: Ticked up slightly from roughly 11.80x to about 11.81x, consistent with a modestly higher valuation multiple assumption.

Digital-first strategy and disciplined cost management are driving customer growth, improved efficiency, and long-term margin expansion across core and diversified business lines.
Strategic shifts into high-quality auto lending, insurance, and fee-based services are supporting stronger credit quality, revenue diversification, and resilient net interest margins.
Continued dependence on traditional auto lending, intensifying competition, regulatory burdens, and limited diversification expose Ally to profitability risks and greater earnings volatility.

Catalysts

About Ally Financial

A digital financial-services company, provides various digital financial products and services in the United States, Canada, and Bermuda.What are the underlying business or industry changes driving this perspective?

The accelerating demand for digital banking and app-based financial services is enabling Ally's all-digital business model to acquire and retain customers more efficiently, supporting ongoing net customer growth and driving higher deposit stability; this should support long-term revenue and net margin expansion as the cost advantages of digital scale deepen.
Rising application volumes and origination yields in Ally's core auto finance franchise-specifically with a high mix of prime borrowers-signal that investments in risk analytics and underwriting are both improving credit quality and enabling selective loan growth; over time, this is likely to reduce net charge-offs and stabilize or expand net interest margins and earnings.
Ongoing balance sheet remixing into higher-yielding auto and corporate finance loans, as well as optimized deposit pricing, are increasing net interest margin beyond recent headwinds (e.g., card sale, mortgage runoff); this points to a path for above-peer NIM and sustained earnings improvement.
Expansion into insurance and diversified lending adjacencies, supported by cross-selling to a deep dealer and consumer relationship network, is boosting high-margin fee-based revenues, with insurance written premiums and engagement setting up a growing ancillary revenue stream less sensitive to NIM compression.
Ally continues to exercise disciplined cost management and digital operating leverage-as noninterest, controllable expenses have declined for seven consecutive quarters-while ongoing investment in AI-driven credit and digital servicing should drive further efficiency gains, bolstering net margins and long-term earnings growth.

Ally Financial Earnings and Revenue Growth

Ally Financial Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Ally Financial's revenue will grow by 12.0% annually over the next 3 years.
Analysts assume that profit margins will increase from 4.7% today to 18.6% in 3 years time.
Analysts expect earnings to reach $1.8 billion (and earnings per share of $5.86) by about September 2028, up from $324.0 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $2.3 billion in earnings, and the most bearish expecting $1.6 billion.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 11.4x on those 2028 earnings, down from 39.3x today. This future PE is greater than the current PE for the US Consumer Finance industry at 10.5x.
Analysts expect the number of shares outstanding to grow by 1.02% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 11.65%, as per the Simply Wall St company report.

Ally Financial Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Heavy reliance on auto lending, especially as secular trends shift towards electric vehicles and direct-to-consumer auto sales models, may reduce traditional auto financing volumes, constraining revenue and long-term loan growth.
Increased competition from both established banks returning to the auto lending space and innovative fintech platforms could compress origination yields, erode market share, and put downward pressure on net interest margins and earnings.
Persistent regulatory pressures and compliance costs, including evolving consumer protection and data privacy requirements, could significantly increase noninterest expenses and limit the operating flexibility needed to sustain profit margins.
The ongoing run-off of low-yielding mortgages and the divestiture of noncore businesses (e.g., credit cards, direct-to-consumer mortgages) may hinder efforts to diversify, making Ally more exposed to cyclicality in the auto and consumer credit markets, risking revenue stability and limiting long-term earnings growth.
Elevated levels of consumer credit uncertainty, potential worsening unemployment, and muted deposit growth signal increased risk of higher loan losses and provisions in the future, especially if economic conditions deteriorate, directly threatening future net income and overall profitability.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $46.471 for Ally Financial based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $59.0, and the most bearish reporting a price target of just $39.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $9.6 billion, earnings will come to $1.8 billion, and it would be trading on a PE ratio of 11.4x, assuming you use a discount rate of 11.7%.
Given the current share price of $41.41, the analyst price target of $46.47 is 10.9% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

ALLY: Shares Will Benefit From Improving Auto Credit Trends