What happened
A resilient real estate market makes for a strong real estate investment trust (REIT) sector, a situation that has brought the bulls into mortgage REIT AGNC Investment (AGNC -1.28%). One of those optimists lifted his price target on the stock substantially on Tuesday, and as a result, its share price closed 2% higher.
So what
The lifter was RBC Capital analyst Kenneth Lee, who raised his target 33%. He now believes that AGNC is fairly valued at $12 per share, up from his previous target of $9. In doing so, Lee maintained his outperform (buy) recommendation on the stock.
The reasons behind Lee's burst of bullishness weren't immediately apparent. But his move comes on the heels of a general rise in popularity for AGNC stock since the middle of 2022.
Last year was one to forget for the mortgage industry in general, and mortgage REITs (mREITs) in particular. Rising interest rates put serious pressure on mREITs, since they rely on short-term funding to purchase mortgages for their portfolios.
Yet AGNC has an ace in the hole: It's an agency REIT, meaning its portfolio is stuffed with mortgages backed by U.S. government agencies that guarantee those loans. This results in almost no credit risk, a great advantage for a lender.
Now what
So AGNC is better equipped than certain peers to weather the storm of regular interest rate hikes. That was apparent in the fourth quarter and full-year 2022 results it posted at the end of January.
Total revenue of $575 million and the per-share net income of $0.74 were both well above the average analyst estimates for revenue of $401 million and $0.65 per share in net income.
