BTIG analyst Eric Hagen has maintained their neutral stance on PMT stock, giving a Hold rating on January 31.
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Eric Hagen has given his Hold rating due to a combination of factors influencing PennyMac Mortgage’s current and future prospects. The company recently reported strong earnings, leading to a stock rally; however, its dividend yield remains lower compared to other REIT-servicers like Annaly and Two Harbors. Additionally, the potential for dividend increase seems limited, especially with upcoming debt maturity and the possibility of the Fed making more aggressive rate cuts in the future.
On the other hand, there is some interest from investors in the convertible bonds due next March, which offer a higher yield. While lower interest rates might offer some advantages, the company’s leverage and prepayment sensitivity suggest that its earnings and valuation could benefit more from a steepening yield curve. Furthermore, the valuation of PennyMac’s mortgage servicing rights reflects a high recapture rate, which underscores the company’s strength but might restrict opportunities for a premium stock valuation.
In another report released on January 31, Piper Sandler also reiterated a Hold rating on the stock with a $14.50 price target.