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Investing.com - Deutsche Bank initiated coverage on Fannie Mae (OTC:FNMA) with a Buy rating and a price target of $20.00 on Thursday. According to InvestingPro data, FNMA has seen remarkable momentum with a 324.7% year-to-date return, though current analysis suggests the stock is trading above its Fair Value.
The research firm sees attractive upside potential for Fannie Mae despite the stock already rallying approximately 300% year-to-date. With a current market capitalization of $79.94 billion and a "GOOD" Financial Health Score from InvestingPro, the company shows strong market presence. Deutsche Bank also initiated coverage on Freddie Mac (OTC:FMCC) with a Buy rating and a $25 price target.
Deutsche Bank notes that both government-sponsored enterprises (GSEs) are approaching a likely recapitalization and release from government control, though it cautions there is meaningful downside risk if the recapitalization process brings greater-than-expected dilution.
The bank points out that these companies have been largely overlooked by investors since the Global Financial Crisis, when efforts to stabilize them put control and effective ownership in government hands.
According to Deutsche Bank, the businesses are now largely de-risked and generating utility-like returns, with the current administration seemingly poised to initiate a recapitalization process that could ultimately free the GSEs from conservatorship and allow the government to begin monetizing its 79.9% ownership.
In other recent news, Fannie Mae announced the commencement of its latest reperforming loan sale, involving approximately 3,058 loans with an unpaid principal balance of about $560.5 million. This move is part of Fannie Mae’s ongoing strategy to reduce the size of its retained mortgage portfolio. Additionally, the company has revised its 2025 forecast for existing single-family home sales downward to 4.14 million units from the previous estimate of 4.24 million units. This adjustment is attributed to updated expectations regarding interest rates, with mortgage rates now anticipated to reach 6.5% by the end of 2025 and 6.1% by 2026.
In terms of analyst coverage, B.Riley initiated coverage on Fannie Mae with a Neutral rating and set a price target of $10. The firm highlighted that Fannie Mae has been under U.S. government conservatorship since the 2008 financial crisis, with previous efforts to end this arrangement proving unsuccessful. These developments provide investors with key insights into Fannie Mae’s current financial strategies and market expectations.
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