Annaly Capital: Strong Quarter and Solid Dividend but Full Valuation Supports Neutral Hold Rating

Bank of America Securities analyst Derek Hewett reiterated a Hold rating on Annaly Capital on February 1 and set a price target of $23.50.

Derek Hewett has given his Hold rating due to a combination of factors that balance Annaly Capital’s strong recent performance with a relatively fully valued share price. He notes that the company delivered another robust quarter, modestly beating earnings expectations on the back of healthy spread income, lower interest rate volatility, tighter mortgage-backed securities (MBS) spreads, and record securitization activity across its housing finance platform. Book value per share increased meaningfully, driving an attractive economic return for the quarter, while the dividend remained stable and is expected to be sustainable going forward.

At the same time, Hewett observes that much of this improvement was anticipated by the market, with the stock already trading close to his price objective of $23.50, leaving limited upside from current levels. Although management still sees appealing opportunities in Agency MBS and has prudently managed leverage below historical norms, the risk/reward profile appears balanced rather than compellingly skewed to the upside. Reflecting modestly higher spread income and recent capital issuance, he slightly raises forward earnings estimates but concludes that the current valuation justifies maintaining a Neutral (Hold) stance rather than upgrading the rating.

Hewett covers the Financial sector, focusing on stocks such as Blue Owl Capital, MidCap Financial Investment Corporation, and Golub Capital Bdc. According to TipRanks, Hewett has an average return of 4.0% and a 56.41% success rate on recommended stocks.

In another report released on January 29, Barclays also maintained a Hold rating on the stock with a $24.00 price target.