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Why Shares of Orchid Island Capital Fell Today

By Bram Berkowitz - Updated Apr 15, 2021 at 4:06PM

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The specialty finance company reported first-quarter earnings guidance, and an analyst downgraded the stock.

What happened

Shares of the specialty finance company Orchid Island Capital (ORC 0.34%) dropped 11.4% today after the company announced first-quarter earnings guidance and an analyst downgraded the stock.

So what

Orchid Island, which invests in agency residential mortgage-backed securities (RMBS), recently said that it expects to report a net loss of $0.34 per share in the first quarter.

That includes an estimated $0.60 per share of net realized and unrealized losses on RMBS and derivative instruments.

Line with arrow moving downward

Image source: Getty Images.

Analysts at Jonestrading also downgraded the stock from a hold rating to a sell, while also lowering their price target from $6 per share to $4.75. The stock currently trades at $5.44.

Now what

Despite the loss, the estimated results are expected to be much better than when the company reported a loss of $1.41 per share in the first quarter of 2020.

But the forecast is much worse than the company's performance in the fourth quarter of 2020, when it reported a profit of $0.23 per share.

The company is currently trading over its recent book value of $4.94 per share, so investors may view the stock as overvalued. There is also a lot going on right now with changes in the mortgage market, and considering that the stock has run up significantly over the past year, investors may also find this an opportune time to take gains.

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Orchid Island Capital, Inc. Stock Quote
Orchid Island Capital, Inc.
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