Horizon Technology FinanceNASDAQ: HRZN

Horizon Technology Finance has underperformed the BDC market by 15% since December, with worsening portfolio quality and yield compression. Q1, 2024 earnings report shows continued decline in net investment income, with NAV dropping and portfolio stagnating at lower yield levels. Despite sourcing fresh equity, HRZN's underlying portfolio profile has deteriorated, making it still a risky investment choice with uncertain fundamentals.

Horizon Technology Finance is a well-run BDC that concentrates on technology and life science investments. The BDC's stock has been negatively affected in 2024 by worries about losses in the sector. Even though the valuation has dropped, the 12% dividend yield is more secure than it seems, and there is a possibility for the stock to be revalued higher.

Horizon Technology Finance has underperformed the BDC index and lost a tangible chunk of its market cap since the issuance of my bearish thesis. Looking at the fundamentals, it is clear that the price correction has been fully justified. Despite the drop, I still consider Horizon Technology Finance an unattractive case going forward.

Horizon Technology Finance (HRZN) came out with quarterly earnings of $0.45 per share, missing the Zacks Consensus Estimate of $0.48 per share. This compares to earnings of $0.40 per share a year ago.

Horizon Technology Finance (HRZN) closed at $13.29 in the latest trading session, marking a +0.61% move from the prior day.

Horizon Technology Finance (HRZN) closed at $13.27 in the latest trading session, marking a -0.82% move from the prior day.

In the most recent trading session, Horizon Technology Finance (HRZN) closed at $13.24, indicating a -0.15% shift from the previous trading day.

Horizon Technology Finance offers investors monthly dividend payments, providing recurring income to match fund living expenses. The stock has performed well, outperforming the S&P 500 and other peers in the past decade. HRZN has a healthy payout ratio and potential for special dividends due to NII growth, and could benefit from elevated funding needs amidst a slow IPO market.

Horizon Technology Finance focuses on lending to VC-profile companies with a heavy focus on early-stage growth companies. The majority of HRZN's portfolio is in inherently speculative sectors, such as life sciences and healthcare technology. Plus, HRZN carries a relatively debt-saturated balance sheet, which in the context of consistently deteriorating portfolio quality introduces a toxic combination.