Street Calls of the Week
Investing.com - Citizens has reiterated its Market Outperform rating and $7.00 price target on Redwood Trust (NYSE:RWT), highlighting the stock’s current undervaluation relative to its book value. According to InvestingPro data, the stock’s RSI indicates oversold territory, with strong fundamentals including a healthy current ratio of 7.28.
At Thursday’s closing price of $5.65 per share, Redwood Trust shares were trading at just 0.75 times current GAAP book value of $7.49 per share and 6.6 times Citizens’ new fiscal year 2026 EAD estimate.
These multiples are roughly in line with the Hybrid/Credit Mortgage REIT median multiples of 0.72 times and 6.7 times, respectively, according to Citizens’ analysis.
Since the beginning of this year, Redwood Trust shares have fallen 13.5%, compared to flat performance from Hybrid MREIT peers, a 5.6% rise in the Mortgage REIT ETF (NYSE:REM), and an 11.4% gain in the Russell 2000.
Citizens projects that if its current $7.00 price target is achieved, investors in Redwood Trust could realize a potential next-twelve-month total return of approximately 37%, including a cash yield of about 13% and price appreciation of roughly 24%.
In other recent news, Redwood Trust Inc. reported its second-quarter 2025 earnings, with earnings per share (EPS) reaching $0.18, slightly above market expectations of $0.17. In addition to its earnings report, Redwood Trust announced the pricing of a $50 million offering in 7.75% convertible senior notes due 2027. This offering is a reopening of the same series of notes the company previously issued, which currently have $247.17 million outstanding. The transaction is anticipated to close soon, with the proceeds intended for general corporate purposes. These may include funding operating business and investment activities or repaying existing debt. The company has also indicated potential uses for the funds, such as supporting its mortgage banking businesses, acquiring mortgage-backed securities, or repurchasing a portion of its subsidiary’s 5.75% exchangeable senior notes due 2025. These developments come amidst investor concerns over Redwood Trust’s broader financial challenges and strategic shifts.
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