On Wednesday, JPMorgan adjusted its outlook on AGNC Investment Corp (NASDAQ: NASDAQ:AGNC), reducing the price target to $9.50 from the previous $10.00. The firm maintained an Overweight rating on the stock.
The adjustment follows AGNC Investment Corp's first-quarter 2024 financial results, which reported a Net Spread and Dollar Roll Income per share of $0.58. This figure aligns with the consensus estimate and is slightly below JPMorgan's expectation of $0.60.
AGNC's comprehensive income per share exceeded JPMorgan's projections, coming in at $0.48 compared to the anticipated $0.18. Additionally, the company's tangible book value per share (TBVPS) increased by 1.6% quarter-over-quarter to $8.84, which is slightly above JPMorgan's estimate of $8.77. Despite a decrease in TBV late last week after accounting for the monthly dividend accrual, the net interest spread contracted to 2.98% due to rising funding costs.
The company's management has maintained a positive outlook for Agency Mortgage-Backed Securities (MBS), a sentiment that aligns with JPMorgan's 2024 expectations for Residential Mortgage Real Estate Investment Trusts (mREITs).
The firm believes Agency MBS are attractive for several reasons: they offer relative value, act as flight-to-quality assets, have potential for spread tightening and TBV appreciation, and present limited prepayment risk with sustainable mid-teens returns on equity and dividend yields.
JPMorgan's revised price target of $9.50 is based on 1.05 times their year-end 2024 TBVPS estimate of $8.81, implying a 20.1% annualized total return. The firm will host a post-earnings fireside chat with AGNC's President & CEO Peter Federico and EVP of Strategy and Corporate Development Sean Reid on Friday, April 26.
InvestingPro Insights
AGNC Investment Corp's recent performance and future prospects have caught the attention of investors and analysts alike. According to InvestingPro, net income for AGNC is expected to grow this year, which could be a positive signal for those looking at the company's profitability potential. Additionally, analysts are anticipating sales growth for AGNC in the current year, aligning with the positive sentiment around the company's revenue streams.
InvestingPro data indicates a robust revenue growth of 237.72% for the last twelve months as of Q1 2024, with a staggering quarterly revenue growth of 462.02% in Q1 2024. This exceptional growth is reflected in AGNC's gross profit margin, which stands at 100% for the same period. Moreover, the company's dividend yield is notably high at 15.37%, showcasing its commitment to returning value to shareholders, as evidenced by its track record of maintaining dividend payments for 17 consecutive years. AGNC's current market capitalization is approximately $6.75 billion, with a price-to-earnings (P/E) ratio of 9.67, offering a potentially attractive valuation for investors.
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