Shares of Advanta Corp. dropped Wednesday after a Friedman, Billings, Ramsey & Co. analyst reiterated a "Sell" rating on the stock, forecasting funding challenges and a bleak outlook for the business credit-card lender.
Shares tumbled 95 cents, or 10.4 percent, to $8.17. Shares have fallen 76 percent from a high of $34.51 last June.
Due to worse-than-expected credit deterioration exhibited in the company's April trust data, analyst Scott Valentin reiterated an "Underperform" rating and a target price of $6.25.
Advanta said defaults increased 435 basis points year-over-year to 8.2 percent in April, while total delinquencies increased 225 basis points year-over-year to 5.4 percent.
"Defaults and losses continue to increase at a rapid pace, even in the seasonally strong part of the year," Valentin wrote in a note to clients Wednesday. "Despite the current below-book-value valuation, we believe increasing liquidity and funding risks arising from rapidly deteriorating credit leave the shares susceptible to further downside."
The deteriorating credit metrics will curb demand for future securitizations of the company's credit-card loans and limit funding options, Valentin said.
Advanta packages its business credit-card loans into pools and sells them to investors as bonds.
On Monday, the Spring House, Pa.-based company said it found buyers in the bond market for $247 million in business credit-card loans.
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