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On Tuesday, Raymond (NSE:RYMD) James reiterated its Strong Buy rating on Redwood Trust (NYSE:RWT) with a steady price target of $9.50, representing a potential 54% upside from the current price of $6.16. The affirmation follows a thorough analysis of the company’s fourth-quarter results and the details disclosed in its Form 10-K. According to InvestingPro data, Redwood Trust maintains a remarkable 31-year streak of consistent dividend payments, currently offering an attractive 11.7% yield. According to the firm’s analyst, Stephen Laws, adjustments to the 2025 estimates were made, primarily due to anticipated reductions in non-interest income. Despite these adjustments, the analyst expects Redwood Trust to experience robust origination volumes and gain on sale margins that will contribute to the continued growth of its Earnings Assets under Development (EAD). InvestingPro analysis reveals that while 5 analysts have revised their earnings downward, the company is expected to remain profitable this year with a projected EPS of $0.75.
The analyst highlighted that a potential decrease in interest rates could serve as a positive influence on Redwood Trust’s business operations. The maintained Strong Buy rating reflects several factors, including the shifting landscape of residential consumer lending, where banks that once competed with Redwood Trust are now forming partnerships. This change is seen as an opportunity for the company. The company’s financial health appears solid, with InvestingPro data showing liquid assets exceeding short-term obligations and a healthy gross profit margin of 86%.
Furthermore, the analyst’s outlook for book value growth and the current attractive valuation of Redwood Trust’s shares were cited as reasons for maintaining the $9.50 per share target. The company’s strategic positioning and financial prospects appear to be in alignment with Raymond James’ positive expectations, despite the minor revisions to future earnings estimates.
Redwood Trust’s performance in the market and its financial results will continue to be monitored by investors following the guidance provided by Raymond James. The firm’s perspective offers insight into the potential trajectory of Redwood Trust amidst evolving market conditions and interest rate dynamics.
In other recent news, Redwood Trust Inc . disclosed preliminary financial results for the fourth quarter of 2024, indicating a decrease in book value per common share to an estimated range of $8.40 to $8.50. This marks a decline from $8.74 at the end of the third quarter, attributed primarily to higher benchmark interest rates affecting valuations in its securities portfolio. The company also announced the pricing of a $90 million public offering of senior notes with a 9.125% interest rate, maturing in 2030, with the option for underwriters to purchase an additional $13.5 million to cover over-allotments. JMP Securities maintained a Market Outperform rating on Redwood Trust, with a price target of $8.00, following a review of the company’s third-quarter 2024 performance. Additionally, Redwood Trust filed a shelf registration statement with the SEC and introduced a Direct Stock Purchase and Dividend Reinvestment Plan to facilitate share acquisition. The company expanded its Aspire platform to include alternative loan products, addressing the demand for flexible financing solutions. Redwood Trust also refreshed the branding of its Sequoia jumbo loan platform, continuing its growth trajectory into 2025. These developments reflect Redwood Trust’s ongoing efforts to navigate market challenges and enhance its financial and operational strategies.
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