Compass Point Downgrades Two Harbors Investment (TWO) to Neutral

March 26, 2013 7:42 AM EDT
Get Alerts TWO Hot Sheet
Price: $8.76 -0.23%

Rating Summary:
    10 Buy, 6 Hold, 0 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 30 | Down: 30 | New: 23
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Compass Point downgraded Two Harbors Investment (NYSE: TWO) from Buy to Neutral with a price target of $14.75.

The analyst comments, "While the near term outlook for levered MBS investing remains stable and the company has made significant progress in their business diversification efforts, the current share price reflects this optimism and further multiple expansion would require a more dramatic re-deployment of capital. In addition to the Silver Bay transaction, investing in asset classes such as whole loans, excess MSRs as well as other new business initiatives will continue to differentiate TWO from other mortgage REITs and justify a premium valuation. The recent capital raise, a steeper yield curve and a diversified investment approach should allow TWO to effectively navigate many of the headwinds that will face MBS investors. The March 19 common equity offering should be accretive to book value per share (BVPS), which we estimate increased by between 3-4% since YE12 ($11.54) and shares have recently reacted positively to TWO's Freddie Mac MSR approval. Our $14.75 price target represents a premium valuation at 1.3x YE12 BVPS and a pro-forma dividend yield of 9.2%."

For an analyst ratings summary and ratings history on Two Harbors Investment click here. For more ratings news on Two Harbors Investment click here.

Shares of Two Harbors Investment closed at $13.74 yesterday.

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