What happened?
Shares of student loan provider Sallie Mae (NASDAQ: SLM) fell 10.2% in the morning session after the company reported a third-quarter net loss and sharply lowered its full-year earnings guidance due to rising charge-offs.
According to a company press release, Sallie Mae posted a third-quarter GAAP net loss of $0.19 per common share, driven by provisions and expenses associated with record origination volume. The company noted $90 million in net charge-offs alongside $221 million in non-interest expenses. Sallie Mae lowered its full-year earnings expectations to between $1.95 and $2.05 per share from an earlier outlook of $3.10 to $3.20 following higher charge-offs. This steep forecast revision highlighted that escalating credit losses were eroding profitability despite strong loan volume.
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What is the market telling us
Sallie Mae’s shares are not very volatile and have only had 5 moves greater than 5% over the last year. Moves this big are rare for Sallie Mae and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 11 months ago when the stock dropped 16.4% on the news that multiple analysts downgraded the stock, citing concerns about a higher expense outlook.
Morgan Stanley lowered its rating on the student loan company from 'Overweight' to 'Equalweight' and cut its price target. The change came after Sallie Mae presented a scenario that showed potentially higher-than-expected expenses in 2026 and 2027 as it prepared for new loan opportunities and potential government changes. Due to this outlook, Morgan Stanley reduced its earnings per share estimates for those years. Adding to the pressure, Compass Point also downgraded the stock more severely, from 'Buy' to 'Sell,' and significantly lowered its price target from $35.00 to $23.00.
Sallie Mae is down 28.2% since the beginning of the year, and at $19.67 per share, it is trading 36.2% below its 52-week high of $30.85 from December 2025. Despite the year-to-date decline, investors who bought $1,000 worth of Sallie Mae’s shares 5 years ago would now be looking at an investment worth $1,049.
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