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Investing.com - Wells Fargo has assumed coverage on PennyMac Financial (NYSE:PFSI) with an Overweight rating and a price target of $115.00 on Monday. The $5.68 billion market cap company has shown impressive momentum, with InvestingPro data showing a strong return over both one and three months.
The firm cited PennyMac’s strong franchise, including its position as the top correspondent aggregator, along with growth opportunities in consumer direct and broker channels as key factors in its rating decision.
Wells Fargo also highlighted PennyMac’s large and profitable servicing platform, which serves as a natural hedge to its origination business, noting that while mortgage market fundamentals remain challenging, excess capacity continues to exit the industry.
The $115 price target is based on approximately 1.3 times Wells Fargo’s forward book value per share estimate of $89.58, representing a premium to PennyMac’s five-year average price-to-book value of about 1.15 times.
The target price represents approximately 8 times Wells Fargo’s 2026 estimated earnings per share, which the firm notes is below public peers, while suggesting "better days are ahead" for PennyMac despite expectations that fundamentals won’t recover in a straight line.
In other recent news, PennyMac Financial Services reported its second-quarter earnings, which fell short of analysts’ expectations. The company posted an earnings per share (EPS) of $2.54, missing the forecasted $2.88, and reported revenue of $444.73 million, which was below the expected $545.04 million. This earnings miss was primarily due to lower gain on sale income, although it was partially offset by higher servicing fees. Additionally, PennyMac Financial announced the pricing of a $650 million senior notes offering at an interest rate of 6.750%, with the notes maturing in 2034. The company plans to use the proceeds to repay borrowings and for general corporate purposes. Piper Sandler has adjusted its price target for PennyMac Financial to $121, down from $125, while maintaining an Overweight rating on the stock. Meanwhile, Keefe, Bruyette & Woods (KBW) has reiterated its Outperform rating with a price target of $117, following discussions with PennyMac’s management team. These developments provide investors with insights into the company’s financial strategies and market evaluations.
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