UWMC - UWM Holdings stock drops after Piper downgrades to Underweight

UWM Holdings (NYSE:UWMC) stock is sliding 4.7% in Thursday premarket trading after Piper Sandler analyst Kevin Barker downgraded the wholesale mortgage company to Underweight as he expects it will be difficult for the company to generate earnings that exceed its current dividend rate. Demand for mortgages have been falling as interest rates rise. Note that mortgage applications for new home purchases fell 11.0% in the week ended May 13, according to the Mortgage Bankers Association. Piper's Barker points out that UWMC's production revenue is declining rapidly on lower demand and expenses should decline as well, "but we think the pace of expense reductions would be slower and therefore UWMC would experience operating margin compression." "In our view, the best positioned in this market are those with a large servicing revenue stream to buffer origination headwinds, ample excess capital to take advantage of opportunities, and have priced in persistent headwinds from higher

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UWM Holdings stock drops after Piper downgrades to Underweight