Prospect Capital (PSEC) Weakness Viewed as Buying Opportunity - National Securities

National Securities maintained a Buy rating on Prospect Capital Corporation (NASDAQ: PSEC) price target of $13.00. Analyst Andrew Kerai thinks SEC issues my ultimately be positive for shareholder, and he thinks related weakness is a buying opportunity.

"Prospect was informed by the SEC that some of its wholly-owned portfolio companies should be considered investment companies and consolidated. Should this occur, the company may be required to restate historical earnings and consolidate these entities for accounting purposes going forward. At first glance, this appears negative, and resulted in the stock trading significantly lower by roughly 5% yesterday. However, given that this could result in lower interest income recognized under GAAP accounting, while cash income from these investments would remain unchanged, we believe this could positively impact the company’s net asset value and taxable earnings," said Kerai.

"Given that incentive fees are based on the company’s GAAP preincentive fee net investment income, which would likely be lower should the company consolidate some of these entities, a possible restatement could result in higher historical taxable earnings (given lower incentive fees) and a higher net asset value. Furthermore, this may increase the amount of spillover income to support the current dividend based on undistributed taxable earnings. In essence, while we believe the SEC’s assertion was viewed negatively by many investors, which explains the significant decline in the stock price, we believe this should be viewed positively given that it could result in lower incentive fees and higher distributable income for shareholders," he added.

For an analyst ratings summary and ratings history on Prospect Capital Corporation click here. For more ratings news on Prospect Capital Corporation click here.

Shares of Prospect Capital Corporation closed at $10.20 yesterday.

You May Also Be Interested In

• Worthington Enterprises raises dividend 5%, adds board member
• Boundless Bio agrees to merge with Serapha Bio in all-stock deal
• Smart Digital Group faces Nasdaq delisting after SEC trading suspension