AFCG

AFC Gamma ($AFCG) Executives Load Up On Shares After Earnings-Driven Plunge, Spotlighting 18.5% Dividend Yield

03/27/2025 20:59

Executives at AFC Gamma Inc. ($AFCG), a specialty lender to the cannabis industry, have recently engaged in significant share purchases following a sharp decline in the company's stock price. In mid-March 2025, immediately after the stock plummeted due to disappointing earnings, the CEO and other key officers bought substantial amounts of shares, signaling strong confidence in the company's long-term prospects. AFC Gamma's stock was trading at $8.36 before its March 13, 2025 earnings release, but plunged to $6.76 on March 14 following weaker-than-expected results and analyst downgrades – a decline of approximately 19%. The stock continued its descent to as low as $6.24 in subsequent trading sessions. Notably, the company's key executives stepped in with major purchases immediately following this price drop. Over March 14 and 17, CEO Daniel Neville acquired a total of 46,599 shares for approximately $300,575, Director Leonard Tannenbaum purchased 82,007 shares for about $518,686, and President Robyn Tannenbaum bought 8,000 shares for roughly $49,680. This was followed by an additional purchase of 5,000 shares for $31,000 by the CEO on March 26. AFC Gamma transformed into a pure-play cannabis industry lender after spinning off its commercial real estate portfolio in July 2024. This business restructuring has temporarily impacted the company's financial performance. The quarter ended December 2024, reported on March 13, 2025, showed adjusted earnings of 29 cents per share, significantly down from 49 cents in the same period the previous year. Revenue also decreased by 52.2% to $7.64 million, substantially missing analyst expectations of $11.48 million. In response to these results, Jefferies downgraded $AFCG on March 14. Despite this, the average analyst rating remains 'buy,' with a median price target of $13.00, considerably higher than the current trading level. Currently, $AFCG is a small-cap stock with a market capitalization of approximately $189 million, trading at a P/E ratio of 20.45 and a P/B ratio of 0.85. Particularly noteworthy is its substantial dividend yield of 18.51%, which has become even more attractive from an income perspective following the stock's decline. Examining insider trading patterns reveals that this is not the first significant buying activity. In early June 2024, officer Leonard Tannenbaum purchased a total of 88,835 shares for approximately $1,066,827 over two days. However, the stock subsequently plummeted less than a month later due to the company's spin-off of its commercial real estate portfolio. What distinguishes the recent insider buying is that it occurred after disappointing earnings and a stock price drop. The simultaneous large purchases by the CEO, President, and Director are particularly significant as they indicate strong management confidence in the company's value. While such insider activity is generally regarded as a positive signal, investors should remain mindful of regulatory changes in the cannabis industry and interest rate trends that could impact the company's lending business. Additionally, despite the attractive 18.51% dividend yield, the high payout ratio of 4.96 raises questions about dividend sustainability. Nevertheless, AFC Gamma's current ratio of 4.19 and cash ratio of 1.51 suggest short-term financial stability. The company also expects to meet or exceed its $100 million origination goal for the year, indicating ongoing business momentum. The recent substantial insider purchases may be interpreted as management's rebuttal to the market's overreaction, potentially offering a compelling signal for value investors.

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