Last Update21 Oct 25Fair value Increased 3.23%
Arbor Realty Trust’s analyst fair value price target has increased to $12.00 from $11.63, as analysts cite improved investment activity and moderating risks in the broader mortgage REIT sector as key drivers for the upward revision.
Analyst Commentary
Analyst perspectives on Arbor Realty Trust have recently become more constructive, with a series of upward price target revisions reflecting improved expectations for the company’s performance. However, they remain attuned to certain market risks and sector-specific challenges.
Bullish Takeaways
- Bullish analysts highlight accelerating investment activity, which is expected to drive earnings growth in the coming quarters.
- Loan resolutions are proceeding at a healthy pace, supporting both asset quality and the company’s ability to generate returns.
- The steeper yield curve is viewed as a tailwind for residential mortgage real estate investment trusts. This provides a more favorable environment for lending and earnings expansion.
- Recent declines in 30-year mortgage rates and tightening agency spreads are contributing to an uptick in mortgage application volumes, especially on the refinancing side.
Bearish Takeaways
- Some analysts remain cautious with Underweight or similar ratings, pointing to lingering risks surrounding inflation and the still-uncertain path of interest rates.
- The positive impact of macroeconomic tailwinds on commercial REITs may be more measured compared to their effect in the residential mortgage segment.
- While progress is being made with non-performing loans, challenges remain and the credit cycle continues to pose risks to execution.
What's in the News
- Arbor Realty Trust has completed the repurchase of 4,481,397 shares, representing 2.43% of shares outstanding, for a total of $48.84 million as part of the buyback announced on March 17, 2023 (Key Developments).
- No additional shares were repurchased from April 1, 2025 to June 30, 2025, with the buyback program effectively completed during this period (Key Developments).
Valuation Changes
- Fair Value Price Target has increased modestly from $11.63 to $12.00.
- Discount Rate has risen slightly, moving from 8.12% to 8.31%.
- Revenue Growth remains negative but has improved significantly, with the decline narrowing from -39.92% to -26.86%.
- Net Profit Margin has decreased notably from 98.67% to 82.40%.
- Future P/E ratio has dropped considerably, moving from 22.75x to 15.99x.
Key Takeaways
- Elevated interest rates and reduced agency production are expected to slow revenue growth and pressure net income.
- Dividend strategy may adjust to lower earnings guidance, affecting shareholder returns and EBITDA.
- Arbor Realty Trust's resilience, strategic loan modifications, and diversified revenue streams bolster shareholder confidence and competitive advantage in a challenging environment.
Catalysts
About Arbor Realty Trust- Invests in a diversified portfolio of structured finance assets in the multifamily, single-family rental, and commercial real estate markets in the United States.
- Elevated interest rates are expected to persist, leading to significant headwinds in agency origination volumes and causing a deceleration in revenue growth from this segment.
- The reduction in SOFR over the past year decreases earnings on escrows and cash balances, impacting net margins by reducing interest income generated from these assets.
- There will be a temporary drag on earnings due to the repositioning of REO assets, which will take 12 to 24 months, indicating a negative impact on net earnings and margins in the near term.
- A strategic decision to reset dividends according to new earnings guidance may dilute shareholder returns and reflect anticipated lower distributable income, affecting EBITDA.
- A potential decrease in agency production by 10% to 20% in 2025 due to the high interest rate environment could lead to lower revenue streams and put pressure on net income.
Arbor Realty Trust Future Earnings and Revenue Growth
Assumptions
How have these above catalysts been quantified?- Analysts are assuming Arbor Realty Trust's revenue will decrease by 28.7% annually over the next 3 years.
- Analysts assume that profit margins will increase from 35.6% today to 96.5% in 3 years time.
- Analysts expect earnings to reach $219.3 million (and earnings per share of $1.07) by about April 2028, down from $223.3 million today. The analysts are largely in agreement about this estimate.
- In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 15.1x on those 2028 earnings, up from 10.0x today. This future PE is greater than the current PE for the US Mortgage REITs industry at 13.4x.
- Analysts expect the number of shares outstanding to grow by 0.53% per year for the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 8.36%, as per the Simply Wall St company report.
Arbor Realty Trust Future Earnings Per Share Growth
Risks
What could happen that would invalidate this narrative?- Arbor Realty Trust has managed a strong fourth quarter and closed out 2024 as a very strong year despite a challenging environment, suggesting resilience. This could maintain its revenue and net margins.
- The company has a large cushion between earnings and dividends and has maintained its dividend, unlike its peers, which contributes to shareholder confidence and supports earnings.
- The management has successfully modified and repositioned a significant portion of its loan book, improving collateral values, which could safeguard future revenues and earnings.
- The company's strong presence in the agency business and growth in the single-family rental and construction lending platforms could provide additional streams of revenue, enhancing overall income.
- Arbor's historical growth in book value by 26% over the last 5 years, compared to a decline among peers, indicates its potential competitive advantage in preserving shareholder equity and achieving favorable net margins.
Valuation
How have all the factors above been brought together to estimate a fair value?- The analysts have a consensus price target of $12.312 for Arbor Realty Trust based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $15.0, and the most bearish reporting a price target of just $10.5.
- In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $227.2 million, earnings will come to $219.3 million, and it would be trading on a PE ratio of 15.1x, assuming you use a discount rate of 8.4%.
- Given the current share price of $11.58, the analyst price target of $12.31 is 5.9% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
- We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.
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Disclaimer
AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.