Fannie Mae, Freddie Mac shares tumble after conservatorship comments
On Monday, Rithm Capital Corp. (NYSE:RITM), currently trading at $10.54, received an upgrade in its stock rating from Neutral to Overweight by Piper Sandler, accompanied by a price target increase to $14.00, up from $12.50. The revision follows Rithm Capital’s first-quarter performance in 2025, which Piper Sandler’s analysts found impressive, particularly due to strong servicing fee income and a robust 17% core return on equity (ROE). According to InvestingPro data, the company has demonstrated strong profitability with a gross profit margin of 100%.
Piper Sandler believes that Rithm Capital is undervalued, noting that the stock is trading at a discount to its book value and at only five times its estimated 2026 earnings. This assessment aligns with InvestingPro’s Fair Value analysis, which indicates the stock is currently undervalued. The company maintains an attractive P/B ratio of 0.85 and offers a significant 9.49% dividend yield, having maintained dividend payments for 13 consecutive years.
The company’s diversified business model, which includes mortgage servicing and asset management, is cited as a key strength that should help Rithm navigate various market conditions. The analysts highlight the company’s sizable servicing portfolio, which is expected to perform well even in environments with elevated interest rates.
Furthermore, Rithm Capital’s plans to expand its asset management segment are anticipated to further enhance the company’s valuation. With the adjusted price target, Piper Sandler suggests that there is potential for a 40%+ total return on Rithm Capital shares over the next 12 months. The endorsement from Piper Sandler comes as a positive note for the company, signaling confidence in its future financial performance and strategic direction.
In other recent news, Rithm Capital Corp reported its first-quarter 2025 earnings, revealing an earnings per share (EPS) of $0.52, which exceeded analyst forecasts of $0.47. However, the company faced a revenue shortfall, bringing in $768.38 million compared to the expected $1.24 billion. Despite the revenue miss, the company’s earnings available for distribution grew by 8% year-over-year. Rithm Capital also announced the launch of several new funds and the expansion of its financial services. The company maintains its strong position in the mortgage servicing and origination markets. Additionally, Rithm Capital is exploring strategic initiatives, including mergers and acquisitions in the mortgage and asset management sectors, and is considering structural changes such as a C-Corp conversion. Analysts from various firms inquired about potential opportunities following the Cooper-Rocket merger and the company’s fundraising efforts, with management emphasizing their commitment to unlocking shareholder value.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.