AFC Gamma’s Strategic Shift to BDC: Enhanced Growth Potential and Diversified Investment Opportunities Justify Buy Rating
Michael Elias from TD Cowen maintains a Buy rating on AFC Gamma, despite lowering the price target to $9.00. AFC Gamma is transitioning from a mortgage REIT to a Business Development Company by Q1 2026, expanding its lending beyond the cannabis industry. This strategic shift is expected to enhance growth and diversify investments. Despite mixed Q3 results, the company plans to reinvest principal repayments into stable sectors, potentially improving loan quality and financial performance, justifying the Buy rating.
Michael Elias, an analyst from TD Cowen, maintained the Buy rating on AFC Gamma. The associated price target was lowered to $9.00.
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Michael Elias has given his Buy rating due to a combination of factors including AFC Gamma’s strategic shift and future growth potential. The company is transitioning from a mortgage REIT to a Business Development Company (BDC) by the first quarter of 2026, which will allow it to expand its lending activities beyond the cannabis industry. This strategic pivot is expected to enhance AFC Gamma’s investment opportunities and drive faster loan and DE/share growth over time.
Despite mixed third-quarter results, including lower-than-expected revenue and EBIT, the company managed to maintain its DE/share and received significant principal repayments. These repayments are anticipated to be reinvested into more stable and diversified sectors, which could improve the quality of its loan book. Although the initial returns on non-cannabis investments might be lower, the broader investment scope is expected to stabilize yields and improve overall financial performance, justifying the Buy rating.
