Compass Point Upgrades Annaly Capital Management (NLY) to Buy Following Buyback Plan

October 17, 2012 8:19 AM EDT
Get Alerts NLY Hot Sheet
Price: $10.16 +0.40%

Rating Summary:
    5 Buy, 14 Hold, 6 Sell

Rating Trend: Down Down

Today's Overall Ratings:
    Up: 30 | Down: 30 | New: 23
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Compass Point upgraded Annaly Capital Management (NYSE: NLY) from Neutral to Buy with a price target of $17.00 on bold capital action.

The firm comments, "We are upgrading the shares of NLY to Buy from Neutral. Our $17 price target remains unchanged and represents 1.05x estimated 3Q12 book value per share and an 11.8% current dividend yield. If achieved, our price target represents a total return of 21%. Three things have led us to change our opinion on the shares of NLY. First, yesterday's $1.5B share repurchase program is a smart allocation of capital given current reinvestment yields and should provide a floor for the share price and improves the risk versus return outlook. Second, while prepayment rates will increase in October and remain high throughout year end, QE3 will remain a strong, if not somewhat artificial, bid for Agency MBS. This bid should support book value per share at NLY and other mortgage REITs. Third, the valuation works as NLY shares trade at 0.97x BVPS and a 12.7% current dividend yield, both low relative to historical trading multiples (especially given the shape of the yield curve and rate outlook)."

For an analyst ratings summary and ratings history on Annaly Capital Management click here. For more ratings news on Annaly Capital Management click here.

Shares of Annaly Capital Management closed at $15.72 yesterday.

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