What happened
Not for the first time in recent weeks, Annaly Capital Management (NLY 1.02%) took a sharp hit on the stock exchange Monday. The share price of the mortgage real estate investment trust (mREIT) fell by over 7% on the latest in a series of analyst price-target cuts.
So what
Monday's cutter was Credit Suisse prognosticator Douglas Harter, who lowered his Annaly price target to $20 per share. Although that was quite a bit of distance down from his preceding $26, Harter is maintaining his neutral recommendation on the stock.
Although the Credit Suisse analyst's justification for the move wasn't immediately apparent, it comes at a clearly challenging time for Annaly specifically and the mREIT industry in general.
Rising interest rates have put a double squeeze on such companies. First, they rely on the interest-rate spreads between their funding sources and the income they received from their mortgages. Meanwhile, as rates climb, mortgages become less attractive to potential homeowners, i.e., an mREIT's base of borrowers.
Now what
Harter's cut mirrors those of several other analysts covering Annaly stock.
Last week, for example, RBC Capital's Kenneth Lee made a reduction from $28 per share to $21. However, in contrast to his Credit Suisse peer, he's maintaining an overweight (i.e., buy) recommendation on the stock. Lee reduced his full-year, per-share earnings estimates for 2022 and 2023 but not drastically -- by $0.14 to $4.16 in the case of the former and by a rather mild $0.05 per share to $3.80 for the latter.
