PennyMac Financial cut at KBW on valuation

PennyMac Financial Services (NYSE:PFSI [https://seekingalpha.com/symbol/PFSI]) was trading lower as Keefe, Bruyette & Woods cut its recommendation on the mortgage originator, taking into account the stock's valuation.

Shares were -1.34% during Tuesday morning trade to $116.75.

"While mortgage rates have declined (Freddie Mac PMMS is currently at 6.34% compared to 6.67% at the end of 2Q and 6.85% at year-end 2024) and are expected to fall further, we think the increase in mortgage activity in 2H25 and 2026 is likely to be largely in line with industry forecasts," said analysts Bose George and Frankie Labetti.

"The mortgage originators outperformed in 3Q25 QTD as rates fell, so we think there will be limited upside unless rate expectations decline further," said the analysts in a research note.

The investment bank and broker-dealer downgraded PFSI to Market Perform from Outperform, but increased the price target to $129.00 from $121.00.

Meanwhile, the 2025 EPS estimate was reduced to $10.90 from $11.01, well below the consensus estimate [https://seekingalpha.com/symbol/PFSI/earnings/estimates] of $11.14.

"While the company remains well positioned to generate strong earnings in 3Q, we see limited near-term positive catalysts with the shares already trading at over 1.5x 3QE book value. Our new PT (price target) equates to 1.6x book value, which is close to the high end of the historical range," said the research note.

On the other side, the Wall Street analysts [https://seekingalpha.com/symbol/PFSI/ratings/sell-side-ratings] see the stock as Buy. Seeking Alpha's Quant Rating [https://seekingalpha.com/symbol/PFSI/ratings/quant-ratings] system sees the stock as Sell.

MORE ON PENNYMAC FINANCIAL

* PennyMac Financial Services, Inc. (PFSI) Presents At Barclays 23rd Annual Global Financial Services Conference (Transcript) [https://seekingalpha.com/article/4820657-pennymac-financial-services-inc-pfsi-presents-at-barclays-23rd-annual-global-financial]
* PennyMac Financial Services, Inc. (PFSI) Presents at Barclays 23rd Annual Global Financial Services Conference - Slideshow [https://seekingalpha.com/article/4820697-pennymac-financial-services-inc-pfsi-presents-at-barclays-23rd-annual-global-financial]
* PennyMac Financial Services, Inc. (PFSI) Q2 2025 Earnings Call Transcript [https://seekingalpha.com/article/4803391-pennymac-financial-services-inc-pfsi-q2-2025-earnings-call-transcript]
* Annaly Capital partners with Pennymac in strategic MSR deal [https://seekingalpha.com/news/4501078-annaly-capital-partners-with-pennymac-in-strategic-msr-deal]
* PennyMac Financial prices $650M in 6.750% senior notes due 2034 [https://seekingalpha.com/news/4482086-pennymac-financial-prices-650m-in-6750-senior-notes-due-2034]