Deutsche Bank initiates coverage on Freddie Mac stock with Buy rating

Investing.com - Deutsche Bank initiated coverage on Freddie Mac (OTC:FMCC) with a Buy rating and a price target of $25.00 on Thursday. The stock, currently trading at $12.66 with a market capitalization of approximately $41 billion, appears overvalued according to InvestingPro analysis.

The investment bank also initiated coverage on Fannie Mae (OTC:FNMA) with a Buy rating and a $20 price target, seeing attractive upside potential for both government-sponsored enterprises. Freddie Mac’s stock has indeed surged this year, posting a remarkable 287.69% year-to-date return, with InvestingPro data showing particularly strong momentum in the last three months.

Deutsche Bank noted that both companies have been largely absent from investors’ attention since the Global Financial Crisis, when government intervention placed them under conservatorship and effective government control.

The bank’s analysis indicates the businesses are now largely de-risked and generating utility-like returns, though they remain below their target capital levels.

Deutsche Bank believes the current administration appears ready to initiate a recapitalization process that could ultimately release the GSEs from conservatorship and allow the government to begin monetizing its 79.9% ownership stake in both companies.

In other recent news, Freddie Mac reported that the 30-year fixed-rate mortgage averaged 6.56%, marking a 10-month low, as noted by Chief Economist Sam Khater. Meanwhile, Keefe, Bruyette & Woods has maintained its Underperform rating on Freddie Mac, despite forecasting robust earnings for the company. The firm has set a price target of $4.50 for the stock. Additionally, U.S. Federal Housing Finance Agency Director William "Bill" Pulte commented on the valuation of Fannie Mae and Freddie Mac, estimating their worth between $500-$700 billion, with potential for significant growth. These comments have garnered investor interest in the stocks of both mortgage giants. In another development, Democratic senators, including Elizabeth Warren and Chuck Schumer, have urged the Trump administration to pause the sale of shares in Fannie Mae and Freddie Mac, citing concerns over potential impacts on mortgage rates. Lastly, Treasury Secretary Scott Bessent criticized Boeing’s focus on share buybacks instead of research and development, during a discussion that also touched on plans for Fannie and Freddie’s future.

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