Nelnet began as a student loan provider and has become a general-purpose financial company with a focus on education. In addition to its student loan portfolio, Nelnet has a few unrelated venture capital investments. The CEO's low compensation is remarkable, and the company is primarily owned by its chairman, Michael Dunlap.
Nelnet has sold the majority of its ownership in ALLO for cash proceeds of $410 million, realizing a gain of $175 million. Its student loan servicing business is set to benefit from an increase in borrowers and loan volumes. Earnings from its software business, NBS, were flat year over year, but management is making investments in AI to improve efficiency and potentially lift margins.
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Nelnet continues to generate solid cash flows, which management is strategically deploying where it identifies the greatest opportunities for return. Nelnet's software and payments business, NBS, continues to show impressive growth and profitability and is worth more than half the current market cap. I estimate intrinsic value at $175 per share, which represents an attractive upside and limited downside with book value at $92.3.
Nelnet (NNI) has been upgraded to a Zacks Rank #1 (Strong Buy), reflecting growing optimism about the company's earnings prospects. This might drive the stock higher in the near term.
Nelnet (NNI 7.66%), a diversified financial services and technology company, announced its fourth-quarter earnings for 2024 on Feb. 27, 2025. The company reported strong financial results, outperforming analyst expectations with non-GAAP earnings per share (EPS) of $1.44, exceeding the anticipated $1.23.
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Shares have risen 20% since my previous recommendation where I estimated intrinsic value per share of $145. Owing to strong performance within Nelnet Business Services, where income grew 42% year over year in Q2, I have raised my estimate for intrinsic value to $162 per share. Meanwhile management continues to return capital to shareholders through dividends and buybacks.
Nelnet (NNI) might move higher on growing optimism about its earnings prospects, which is reflected by its upgrade to a Zacks Rank #1 (Strong Buy).