What happened
Thursday was an excellent trading session for many stocks, but Annaly Capital Management (NLY -0.32%) wasn't invited to the party. On a new price-target cut from an analyst, the mortgage REIT (mREIT) barely traded up in price, comparing unfavorably to the nearly 3% surge in the S&P 500 index.
So what
The rain on Annaly's parade was caused by JPMorgan Chase prognosticator Richard Shane. Before market open on Thursday, Shane cut his price target on the stock to $20 from his previous $26. He's maintaining his overweight (i.e., buy) recommendation on the prominent mREIT, however.
The reasons for Shane's downward move weren't clear. Regardless, it should sound vaguely familiar to those tracking Annaly because on Monday, Credit Suisse analyst Douglas Harter did exactly the same. He, too, now pegs the stock as being worth $20 a share after previously having a value at $26. And like Shane, he's keeping his recommendation intact, although interestingly, Harter's was and is neutral.
Now what
The matching cuts are part of a broader trend, as analysts are cooling on Annaly's prospects due to the notable increases in interest rates of late. In cutting his price target from $28 per share to $19 late last month, Piper Sandler's Kevin Barker predicted a difficult fourth quarter for the mortgage-financing industry.
Echoing his peers, Barker argued that those climbing rates are pushing demand for home loans down to lows not seen in years. At the same time, they negatively affect the spread between what mREITs take in from long-term mortgages and what they have to pay for the short-term financing that funds their investments.
