Advantage Solutions Inc. (ADV) Shares Decline Despite Market Challenges

Advantage Solutions Inc. (NASDAQ: ADV)’s stock price has gone decline by -2.80 in comparison to its previous close of 3.57, however, the company has experienced a 4.52% increase in its stock price over the last five trading days. https://www.etftrends.com reported 2024-05-20 that The agency MBS sector has emerged as one of the best relative valuation opportunities in the fixed income market over the past year. Given the stabilization in yields after the May FOMC meeting and the recent cooling of economic data, we believe agency MBS outperformance could continue. Mortgaged-backed securities (MBS) are bonds backed by both the principal and interest cash flows of underlying mortgages, which are pooled and repackaged into interest-bearing bonds through a process called securitization. The mortgage cash flows are passed through to the holders of those bonds. MBS can be backed by both residential and commercial real estate mortgages that are issued either by a housing agency – Fannie Mae (FNMA), Freddie Mac (FHLMC), or Ginnie Mae (GNMA) – or private financial institutions, commonly referred to as non-agency. The MBS market is one of the largest and most liquid global asset classes, with more than $12 trillion of securities outstanding and over $300 billion in average daily trading volume. For this Notes from the Desk, we will be focusing on agency-issued residential mortgages. One of the features of agency MBS is that they have a government-backed credit guarantee from one of the housing agencies. While these agencies aren’t owned by the federal government, they are often seen as backed by it. Thus, agency MBS are not considered to carry any credit risk. However, this doesn’t mean agency MBS are risk-free; there are three key risks associated with these bonds. First, prepayment risk is the possibility that mortgages within an MBS pool are prematurely paid back, which is detrimental to a bondholder as they would have lower future interest payments from the underlying home loans. The duration, or interest rate sensitivity, of an agency MBS would then get smaller as interest rates fall, and vice versa when yields rise, which results in MBS having negative convexity. The second key risk has emerged only in the quantitative easing era. As the Federal Reserve has been a large player in the MBS market, changing expectations around the Fed’s balance sheet policy has been a driver of MBS spreads. Third, US commercial banks are some of the largest buyers of MBS historically, and the regional banking crisis in 2023 has resulted in less demand for MBS, which has kept spreads elevated. The chart below shows the current coupon MBS spread versus BBB corporate bonds. Despite having no credit risk, MBS are trading at a discount to the lower end of the investment grade corporate bond quality segment. We continue to believe that the current valuation of agency MBS offers an opportunity to pick up a yield spread without taking on credit risk. As nearly 80% of mortgages have a rate below 5%, prepayment risk should not emerge as a key risk in the near term. Additionally, the FOMC has started to reduce the pace at which it is shrinking its balance sheet, which is a positive signal for MBS. Finally, the risk emanating from commercial banks should decrease as interest rates stabilize at or lower than current levels. The FOMC has all but ruled out interest rate hikes this year despite stronger-than-expected inflation in the first quarter, so the distribution of outcomes for interest rates remains skewed to the downside. Since rate volatility decreased after the May FOMC meeting and recent data fell short of expectations, the agency MBS market has responded accordingly, with excess returns over treasuries reaching a six-month high. This trend may continue, as agency MBS valuations remain attractive. For more news, information, and analysis, visit the ETF Strategist Channel. Disclosures: This is for informational purposes only and is not intended as investment advice or an offer or solicitation with respect to the purchase or sale of any security, strategy or investment product. Although the statements of fact, information, charts, analysis and data in this report have been obtained from, and are based upon, sources Sage believes to be reliable, we do not guarantee their accuracy, and the underlying information, data, figures and publicly available information has not been verified or audited for accuracy or completeness by Sage. Additionally, we do not represent that the information, data, analysis and charts are accurate or complete, and as such should not be relied upon as such. All results included in this report constitute Sage’s opinions as of the date of this report and are subject to change without notice due to various factors, such as market conditions. Investors should make their own decisions on investment strategies based on their specific investment objectives and financial circumstances. All investments contain risk and may lose value. Past performance is not a guarantee of future results. Sage Advisory Services, Ltd. Co. is a registered investment adviser that provides investment management services for a variety of institutions and high net worth individuals. For additional information on Sage and its investment management services, please view our web site at sageadvisory.com, or refer to our Form ADV, which is available upon request by calling 512.327.5530.

Is It Worth Investing in Advantage Solutions Inc. (NASDAQ: ADV) Right Now?

The 36-month beta value for ADV is at 1.58. Analysts have varying views on the stock, with 0 analysts rating it as a “buy,” 0 rating it as “overweight,” 0 as “hold,” and 0 as “sell.”

The public float for ADV is 26.25M, and currently, shorts hold a 29.62% of that float. The average trading volume for ADV on May 24, 2024 was 838.76K shares.

ADV’s Market Performance

ADV’s stock has seen a 4.52% increase for the week, with a -24.07% drop in the past month and a -9.64% fall in the past quarter. The volatility ratio for the week is 5.55%, and the volatility levels for the past 30 days are at 6.52% for Advantage Solutions Inc. The simple moving average for the last 20 days is -12.27% for ADV’s stock, with a simple moving average of 1.93% for the last 200 days.

Analysts’ Opinion of ADV

Many brokerage firms have already submitted their reports for ADV stocks, with Canaccord Genuity repeating the rating for ADV by listing it as a “Buy.” The predicted price for ADV in the upcoming period, according to Canaccord Genuity is $4 based on the research report published on December 06, 2023 of the previous year 2023.

Morgan Stanley, on the other hand, stated in their research note that they expect to see ADV reach a price target of $3. The rating they have provided for ADV stocks is “Equal-Weight” according to the report published on May 11th, 2023.

Deutsche Bank gave a rating of “Hold” to ADV, setting the target price at $7 in the report published on March 30th of the previous year.

ADV Trading at -16.37% from the 50-Day Moving Average

After a stumble in the market that brought ADV to its low price for the period of the last 52 weeks, the company was unable to rebound, for now settling with -29.90% of loss for the given period.

Volatility was left at 6.52%, however, over the last 30 days, the volatility rate increased by 5.55%, as shares sank -23.74% for the moving average over the last 20 days. Over the last 50 days, in opposition, the stock is trading -14.32% lower at present.

During the last 5 trading sessions, ADV rose by +4.52%, which changed the moving average for the period of 200-days by +30.94% in comparison to the 20-day moving average, which settled at $3.90. In addition, Advantage Solutions Inc. saw -4.14% in overturn over a single year, with a tendency to cut further losses.

Insider Trading

Reports are indicating that there were more than several insider trading activities at ADV starting from Pestello Jack Anthony, who purchase 10,000 shares at the price of $3.87 back on Mar 11 ’24. After this action, Pestello Jack Anthony now owns 146,279 shares of Advantage Solutions Inc., valued at $38,700 using the latest closing price.

Growe Christopher, the Chief Financial Officer of Advantage Solutions Inc., purchase 10,000 shares at $3.49 during a trade that took place back on Mar 06 ’24, which means that Growe Christopher is holding 110,000 shares at $34,868 based on the most recent closing price.

Stock Fundamentals for ADV

Current profitability levels for the company are sitting at:

• 0.01 for the present operating margin
• 0.11 for the gross margin

The net margin for Advantage Solutions Inc. stands at -0.02. The total capital return value is set at 0.01. Equity return is now at value -5.94, with -1.67 for asset returns.

Based on Advantage Solutions Inc. (ADV), the company’s capital structure generated 0.62 points at debt to capital in total, while cash flow to debt ratio is standing at 0.1. The debt to equity ratio resting at 1.65. The interest coverage ratio of the stock is 0.29.

Currently, EBITDA for the company is 364.4 million with net debt to EBITDA at 6.38. When we switch over and look at the enterprise to sales, we see a ratio of 0.68. The receivables turnover for the company is 6.3for trailing twelve months and the total asset turnover is 1.13. The liquidity ratio also appears to be rather interesting for investors as it stands at 1.95.

Conclusion

In conclusion, Advantage Solutions Inc. (ADV) has had a mixed performance lately. Opinion on the stock among analysts is mixed, with some giving it a “buy” rating and others a “hold”. It’s important to note that the stock is currently trading at a significant distance from its 50-day moving average and its 52-week high.