Citizens Cuts Enova’s Price Target after its Bank Deal Falls Apart

Enova International, Inc. (NYSE:ENVA) has abandoned a deal that was supposed to give the online lender something it has never had: its own bank.

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That change was enough for Citizens analyst David Scharf to cut his price target on Enova to $215 from $270 on September 15. He nevertheless kept an Outperform rating on the shares. The move came after Enova announced its decision to withdraw its regulatory applications for the proposed acquisition of Grasshopper Bancorp.

Bull Case

Scharf told investors in a research note that the company cited a lack of clear standards for non-bank lenders and limited progress in the approval process. Although losing Grasshopper changes part of Enova’s strategy, it hasn’t changed the company’s near-term financial outlook. When Enova announced the withdrawal on September 14, management reaffirmed the guidance issued with its second-quarter results, and the company still expects fiscal third-quarter revenue to grow around 25% year over year and adjusted EPS to increase around 30%. For the full year, Enova continues to expect revenue growth of 20% to 25% and adjusted EPS growth of 30% to 35%.

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Those expectations follow a strong second quarter where revenue increased 22% year over year to $929 million, while adjusted EPS rose 33% to $4.31. Originations increased 27%, and combined loans and finance receivables reached a record $5.5 billion, up 28% from a year earlier. Enova is also redirecting some capital toward shareholders, and alongside withdrawing the regulatory applications, management said it intends to accelerate share repurchases for the remainder of 2026. As of June 30, the company had $349 million remaining under its current board authorization, while $218 million was available for repurchases under its senior-note covenants.

CEO Steve Cunningham also said Enova’s future growth and success do not depend on becoming a bank. Citizens’ decision to retain an Outperform rating despite cutting its price target by $55 leaves Scharf constructive on the shares even after the Grasshopper setback.

Bear Case

However, the abandoned transaction removes benefits Enova had expected from owning a bank. When Enova announced the approximately $369 million cash-and-stock acquisition in December 2025, it said the combination could expand its ability to offer financial products across more states and provide more diversified funding opportunities. The company expected the transaction to generate adjusted EPS accretion of more than 15% within the first year and more than 25% once synergies were fully realized beyond the first year.

By April, management was pointing specifically to expected synergies from geographic expansion of Enova’s existing products and lower funding costs from Grasshopper’s deposit businesses. As recently as July, Enova said it remained in constructive dialogue with regulators and looked forward to closing the transaction later in 2026, but less than two months later, it withdrew the applications.

Enova said regulators lacked clearly articulated standards for nonbanks seeking to become banks and argued that bank regulatory guidelines and attitudes had not kept pace with the credit needs currently being served outside traditional banks. Whatever the regulatory disagreement, the practical result is that Enova will not receive the funding, expansion, and expected EPS benefits it had associated with the proposed transaction under its original terms.

Scharf’s price-target reduction also marks a substantial reset. His new $215 target is roughly 20% below the previous $270 target, even though his Outperform rating remains intact.

Conclusion

The Grasshopper withdrawal takes one potential growth and funding lever off the table for Enova, but it hasn’t derailed the company’s current operating outlook.

Management still expects 20% to 25% revenue growth and 30% to 35% adjusted EPS growth for 2026, while the company now plans to accelerate share repurchases. At the same time, investors can no longer count on the funding, geographic expansion, and EPS benefits Enova had expected from acquiring Grasshopper.

In this context, Scharf cut his price target substantially after the regulatory applications were withdrawn, but he didn’t abandon his positive rating on the stock. Enova now has to show that Cunningham’s argument is right, and that the company’s growth story can continue without becoming a bank.

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This article is originally published at Insider Monkey.