Why Pagaya Technologies Blasted 13% Higher Today

There was some encouraging news about Pagaya Technologies (NASDAQ: PGY) on Friday, and this boosted the value of the tech company's stock. It rose by almost 13% in value on a recommendation change from an analyst, and that performance served as quite a positive contrast to the nearly 1% dip of the S&P 500 index on the day.

Time for a recommendation adjustment

Citigroup's Peter Christiansen was the person behind that modification; well before market open he shifted his recommendation on Pagaya stock to buy from the previous neutral. He also cranked his price target higher -- now it stands at $14.50 per share, where previously it was $13.

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According to reports, Christiansen wrote in his update that the stock is being undervalued by the market largely because of markdowns on its 2023 asset-backed securities pool. He anticipates, however, that positive factors like higher demand for personal loans and improvements in efficiency will give the company a fine chance to land in the black on the bottom line this year.

The analyst added that Pagaya trades for roughly 12 times what he's estimating for generally accepted accounting principles (GAAP) profitability in 2026, which pushes it into buy territory.

An AI-fueled financial stock

Pagaya is certainly an intriguing stock in the finance sector, as it harnesses cutting-edge artificial intelligence (AI) functionalities to evaluate creditworthiness. Management has demonstrated that it can be disciplined in its approach to the business, although it hasn't yet hit consistent profitability. It's at the very least a stock to watch in the burgeoning AI space.

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Citigroup is an advertising partner of Motley Fool Money. Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends Pagaya Technologies. The Motley Fool has a disclosure policy.