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On Wednesday, Piper Sandler reaffirmed its Overweight rating on Mr. Cooper Group Inc. (NASDAQ:COOP) with a steady price target of $120.00. Currently trading at $102.65 and near its 52-week high, the stock appears slightly undervalued according to InvestingPro analysis. The firm's analyst highlighted Mr. Cooper's strong position in the mortgage servicing sector, which is expected to perform well amidst persistent high-interest rates.
Mr. Cooper's revenue model, with approximately 80% derived from servicing, is anticipated to benefit if interest rates stay high. The company's current P/E ratio of 13.01 and return on equity of 11% support Piper Sandler's valuation assessment. InvestingPro data reveals strong financial health metrics and eight additional key insights available to subscribers.
Despite the difficulties in the mortgage industry, Mr. Cooper is on track to achieve significant growth in operating earnings per share (nearly 30% in 2025E) and book value. With impressive revenue growth of 16.66% and a strong current ratio of 2.07, the company demonstrates solid operational execution. The analyst anticipates that a higher interest rate environment will drive servicing unpaid principal balance (UPB) growth and industry consolidation, positioning Mr. Cooper favorably for future refinancing opportunities.
The company's 14-18% ROE target was also mentioned, with the belief that it could prove to be a conservative estimate. Mr. Cooper is seen as a strong contender throughout 2025, with the potential to exceed its performance targets.
In other recent news, Mr. Cooper Group has been the subject of bullish sentiments from both JMP Securities and Barclays (LON:BARC). JMP Securities initiated coverage on Mr. Cooper Group with a Market Outperform rating and a price target of $115.00, indicating a potential upside of approximately 25%. The firm's outlook is based on the company's earnings potential, forecasting operating EPS of $10.40 for 2024 and $13.50 for 2025. For the upcoming fourth-quarter 2024 earnings report, JMP Securities expects Mr. Cooper Group to deliver an operating EPS of $2.75.
Similarly, Barclays reiterated its Overweight rating on Mr. Cooper Group while maintaining the price target at $108.00. The firm anticipates a 200 basis point expansion in return on tangible common equity (ROTCE) by 2025 and a 30% growth in earnings per share (EPS). Barclays' outlook is based on the company's ability to navigate rate fluctuations and its potential for significant ROTCE and EPS growth by 2025.
In the third quarter of 2024, Mr. Cooper Group reported a strong pre-tax operating income of $246 million and a tangible book value per share of $69.93, marking an 11% increase year-over-year. The company's upcoming acquisition of Flagstar, expected to conclude in the fourth quarter of 2024, will position Mr. Cooper Group as the industry's largest customer franchise, serving over 6 million customers. Projected pre-tax servicing income for Q4 2024 is between $285 million and $305 million, indicating strong financial performance and strategic growth initiatives.
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