UPDATE: UBS Downgrades Ellington (EFC) to Neutral
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UBS analyst Brock Vandervliet downgraded Ellington (NYSE: EFC) from Buy to Neutral with a price target of $18.50 (from $17.50).
The analyst comments "After an impressive re-rating, EFC's valuation looks full at 1.04x April book value ($18.21) and we lower our investment rating to Neutral. Tighter Agency spreads fueled a steady increase in book value over the last year. With the Fed potentially beginning to reduce its footprint in this market (the "taper") as part of an effort to pave the way for higher interest rates, book value performance could be at greater risk. We also note there could be greater risk of a secondary offering, the primary method by which mortgage REITs raise capital, when trading above book value. We see limited upside from here and move to Neutral from Buy. We update our PT to $18.50 (from $17.50) and update our 2021/22 core EPS estimates to $1.69 and $1.82 from $1.63 & $1.80."
Shares of Ellington closed at $18.96 yesterday.
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