PMT - PennyMac Mortgage cut to Neutral at Piper as stock nears fair value

• Piper Sandler analyst Kevin Barker downgraded shares of PennyMac Mortgage Investment Trust ( NYSE: PMT ) to Neutral from Overweight as he reckoned the stock is trading closer to fair value relative to peers.
• PMT changed hands at 0.9 times tangible book value, representing a "slight premium" to peers, he wrote in a recent note. The peer median is 0.87x.
• In addition, interest-rate volatility could drive PMT to "remain conservative by reducing leverage, and therefore, we expect limited upside potential to earnings over the next few quarters."
• Barker's remarks come after the mortgage REIT turned in an unexpected loss in Q4 , driven by lower fair value in its interest rate and credit sensitive strategies.
• All in, the analyst reduced his EPS estimate for 2023 to $1.52 from $1.67, vs. $1.37 consensus, given lower correspondent origination volume as the company reduces its net exposure to mortgage servicing rights, the note said.
• PMT edged lower by 0.3% in premarket trading.
• The Neutral rating diverges from the average Wall Street analysts' Buy rating.
• Last week, (Feb. 3) Jones Research reiterated its Hold rating for PennyMac.

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