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On Tuesday, RBC Capital Markets adjusted its outlook on AGNC Investment Corp (NASDAQ:AGNC), reducing the firm’s price target to $10 from the previous $11, while maintaining an Outperform rating on the stock. The decision comes as a response to the company’s first-quarter results of 2025, which indicated a negative impact on book value per share (BVPS) due to the widening of mortgage-backed securities (MBS) spreads. Currently trading at $9.02, AGNC sits within the broader analyst target range of $8.50 to $10.50. According to InvestingPro analysis, the stock appears fairly valued based on its comprehensive Fair Value model.
The analyst at RBC Capital, Kenneth Lee, noted that the broadening MBS spreads observed post the first quarter are likely an unsustainable trend based on historical data. The sell-off in MBS is believed to be largely attributed to actions by passive bond funds, as suggested by AGNC management. Despite the challenges, the analyst emphasized that expected returns are still in line with the current levels of common dividends distributed by AGNC Investment Corp. Notably, InvestingPro data shows AGNC maintains an impressive 15.96% dividend yield and has consistently paid dividends for 18 consecutive years.
Lee’s commentary highlighted the firm’s preference for AGNC’s agency-focused investment strategy, particularly in the face of macroeconomic uncertainties that are prevalent in the near term. The revised price target of $10 reflects the updated estimates following the company’s quarterly performance.
AGNC Investment Corp specializes in investments primarily related to residential mortgage-backed securities for which the principal and interest payments are guaranteed by a U.S. government agency or a U.S. government-sponsored entity. The company’s performance is closely tied to the dynamics of the housing market and the broader financial conditions affecting the yield and valuation of mortgage-backed securities.
In other recent news, AGNC Investment Corp. reported its first-quarter earnings for 2025, surpassing analyst expectations with an earnings per share (EPS) of $0.44, compared to the forecast of $0.40. However, the company recorded actual revenue of $846 million, which was slightly below the anticipated $850.28 million. Despite the revenue miss, AGNC’s strategic financial maneuvers and strong liquidity position have bolstered investor confidence. Additionally, AGNC Investment Corp. has launched a $1.5 billion stock issuance program, collaborating with major financial institutions such as Goldman Sachs, Barclays, and J.P. Morgan to facilitate the sales. The program offers the company a flexible option to raise capital in alignment with market conditions. Furthermore, the company declared dividends of $0.36 per share and reported a total comprehensive income of $0.12 per common share. AGNC’s asset portfolio increased to $79 billion, reflecting strategic growth and asset management. The company remains optimistic about the Agency MBS market, with expectations of returns between 19-22% at current valuation levels.
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