NLY: Easing Mortgage Costs Will Support Moderately Improved Future Returns

Annaly Capital Management's fair value estimate has inched higher to approximately $22.18 from $22.10, as analysts modestly raise price targets toward $22.50 in response to improving mortgage market dynamics, including lower 30 year rates and tightening agency spreads that are beginning to lift refinancing and application volumes.

Analyst Commentary

Bullish analysts see the recent price target increases as validation that Annaly's earnings power is improving alongside more constructive mortgage market conditions. They view this as supporting incremental upside to the shares from current levels.

They point to a more favorable backdrop for agency mortgage REITs as 30 year mortgage rates drift lower and spreads tighten, which can enhance portfolio carry, stabilize book value, and potentially unlock higher returns on new capital deployment.

Bullish Takeaways

• Bullish analysts argue that the move in the fair value and targets toward $22.50 reflects better visibility into sustainable earnings as funding and asset yields move into a more balanced range.
• Lower 30 year mortgage rates and tighter agency spreads are seen as supportive of improved asset pricing and reduced mark to market volatility, which can stabilize net asset value and justify higher valuation multiples.
• The 38 percent sequential increase in refinancing driven mortgage applications is viewed as an early sign of healthier market turnover, which should support fee and spread income opportunities over time.
• Maintained positive ratings alongside higher targets signal confidence in management’s execution in repositioning the portfolio for the evolving rate environment. This is seen as reinforcing the case for modest multiple expansion.

Bearish Takeaways

• Bearish analysts emphasize that, despite recent improvements, the mortgage market is still not at a normalized state. This limits visibility into how durable the current spread environment and earnings trajectory will be.
• They note that tighter agency spreads, while positive for book value stability, can compress forward return potential on new investments if funding costs do not decline in tandem.
• Some are cautious that a sharp reversal in rates or spreads could quickly erode recent valuation gains, underscoring ongoing sensitivity of the model to macro conditions.
• There is concern that current price targets may already embed optimistic assumptions on sustained application and refinancing strength, leaving less room for execution missteps or macro disappointments.

What's in the News

• Annaly Capital Management, Inc. was removed as a constituent from the FTSE All World Index (USD). This may affect index fund ownership and trading liquidity (Key Developments).
• The company reported that it repurchased zero shares from July 1, 2025 to September 30, 2025, leaving the latest buyback authorization effectively unused during that period (Key Developments).

Valuation Changes

• The Fair Value Estimate has risen slightly to approximately $22.18 from $22.10, reflecting a modest upward revision in the intrinsic value assessment.
• The Discount Rate has fallen marginally to about 9.17 percent from 9.20 percent, implying a slightly lower required return in the valuation model.
• The Revenue Growth assumption has increased slightly to roughly 30.88 percent from 30.53 percent, indicating a modestly more optimistic outlook for top line expansion.
• The Net Profit Margin forecast has edged down to about 83.21 percent from 83.94 percent, suggesting a small reduction in expected profitability levels.
• The Future P/E multiple has risen minimally to around 7.40x from 7.37x, signaling a very modest increase in anticipated valuation relative to forward earnings.