SLM Corp. (NASDAQ:SLM) saw its stock plunge 14% in premarket trading Tuesday after the company’s 2025 investor day unveiled a much weaker earnings trajectory and higher-than-expected operating costs.
The event, held after Monday’s market close, triggered a wave of analyst downgrades. Morgan Stanley cut its rating from Overweight to Equalweight and reduced its price target to $31.00 from $36.00. Compass Point went further, shifting its view from Buy to Sell with a new price target of $23.00.
A central concern among analysts was the scale of expense growth anticipated as SLM prepares for reduced government participation and positions itself for the Graduate PLUS lending opportunity. The firm’s illustrative earnings model signals a roughly 16% jump in expenses in what analysts interpret as fiscal 2026 — a level seen as far above prior expectations.
The updated earnings framework marks a major reset, effectively unwinding roughly two years of financial progress. Compass Point noted that while Wall Street currently expects FY26/FY27 earnings of $3.40 and $3.88 per share, respectively, SLM’s new outlook implies EPS closer to $2.63 and $2.87 — about 23% to 26% below consensus.
Under the revised guidance, SLM now forecasts fiscal 2026 EPS to fall roughly 19% from the midpoint of the FY25 projection of $3.25. Based on management’s assumptions, it would take until FY28 for earnings to recover above FY25 levels.
While SLM argues that investments tied to Graduate PLUS loans and a more diversified funding strategy could strengthen the company over the long run, the near-term earnings reset and heightened execution risk have sharply dampened investor sentiment.