After declining since the beginning of 2024, shares of Ambac Financial Group, Inc. (NYSE:AMBC) have risen by almost 10% over the past five trading sessions.

The sale of Ambac Financial Group's legacy financial guarantee business is expected to close by yearend, positioning the holding company for cash earnings "within a year or two," according to Roth Capital Partners.

Analyst Harry Fong upgraded the rating for Ambac Financial Group from Neutral to Buy, while raising the price target from $13 to $15.

The Ambac Financial Group Thesis: Following the close of the financial guarantee business sale, the company will commence a share repurchase program of up to $50 million, which would lend upside to the stock, Fong said in the upgrade note.

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The company will have around $180 million of deployable cash after the close of the sale of its financial guarantee business, Ambac Acceptance Corp (AAC), to Oaktree Capital Management, after repaying the bridge loan and plans to use up to $50 million of these funds for share repurchases, the analyst stated.

"However, we believe the company will only repurchase shares at current levels up to about $15 per share as it needs capital for acquisitions chiefly in the distribution business," he added.

"It will take more time for the company to fully roll out its new specialty insurance distribution business, but there are potentially some other strategic changes that could gain more investor enthusiasm sooner such as selling its underwriting operation, which we do not believe is core to its strategy," Fong further wrote.

AMBC Price Action: Shares of Ambac Financial Group had risen by 6.18% to $11.86 at the time of publication on Wednesday.

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