BofA Securities lowered its price target on Burford Capital (NYSE: BUR) to $5.61 from $12.10, while maintaining a Buy rating, reflecting adjustments to its valuation framework.
The firm said it based its valuation on a three-year rolling cash return on tangible equity (Cash RoTE), which it increased to 20%, applying a Gordon Growth Model. The reference year for valuation was shifted to fiscal 2028 estimates from fiscal 2027.
BofA maintained a 2% long-term growth rate but raised its cost of equity assumption to 14% from 12%, citing increased uncertainty following recent developments, including the reduction in value associated with the YPF case.
The firm also adjusted its income rating to 9 from 7, reflecting the company’s lack of dividend payments.
Despite these changes, BofA reiterated its Buy rating, noting that Burford continues to generate strong cash flows from its remaining portfolio, even after accounting for the reduced contribution from the YPF case.
