NLY: Benign Credit And Policy Support Are Expected To Sustain Balanced Returns

Our analyst price target for Annaly Capital Management has been raised by about $1.11 to align with a higher fair value estimate of $24.45, reflecting updated assumptions on discount rate, revenue growth, profit margins, and future P/E that are consistent with the recent series of price target increases cited by multiple Street analysts.

Analyst Commentary

Recent Street research on Annaly Capital Management clusters around a series of higher price targets, with most reports framed around updated assumptions for earnings power, mortgage market conditions, and the valuation multiples investors may be willing to pay. While the tone of these reports generally leans supportive, there are still areas where analysts are cautious on execution and sector risks.

Bullish Takeaways

Bullish analysts have raised their price targets by about US$1 to US$3 in several cases, which suggests they see room for the shares to align more closely with what they view as fair value given their updated models.
Some research points to the broader agency mortgage REIT group as a beneficiary of policy support for mortgage backed securities, which is framed as supportive for Annaly Capital's asset values and book value assumptions.
In their 2026 outlook, one firm cites expectations for a "benign" credit environment and a better mortgage origination market, which feeds into more constructive views on earnings durability and potential capital deployment for Annaly Capital.
Across multiple reports, analysts are comfortable adjusting targets higher while maintaining or reiterating coverage, which signals a level of confidence in Annaly Capital's ability to execute within its current business model.

Bearish Takeaways

Even with higher targets, some coverage remains at more neutral ratings, which indicates that certain analysts still see execution risks or sector headwinds that could limit upside relative to their fair value work.
References to select consumer finance names having "additional upside" in 2026 imply that, for some analysts, Annaly Capital may not be the highest conviction idea in their financials universe, particularly when they compare risk reward profiles.
The focus on policy support and agency MBS spread behavior underlines that a portion of the bullish case is tied to external factors rather than purely company specific drivers, something more cautious analysts flag as a source of uncertainty.
Where targets are raised in smaller increments of around US$1 to US$2, it suggests analysts are refining assumptions rather than making a wholesale shift in their view of Annaly Capital's long term growth or valuation potential.

What's in the News

Annaly Capital Management filed a follow on equity offering for up to US$2.5b of common stock, structured as an at the market program. (Key Developments)
The offering relates to Annaly Capital's common stock, described as an income trust security type. (Key Developments)
The at the market format allows Annaly Capital to sell shares over time rather than in a single transaction, giving the company flexibility in how it accesses equity capital. (Key Developments)

Valuation Changes

The fair value estimate has risen slightly from US$23.34 to US$24.45 per share, an increase of about US$1.11.
The discount rate has increased from 9.18% to 9.87%, indicating a higher required return in the updated model.
The revenue growth assumption has fallen significantly from 30.93% to 4.81%, pointing to a much more conservative growth outlook in the forecast period.
The net profit margin assumption has risen from 83.85% to 93.73%, reflecting higher expected profitability on future revenue.
The future P/E multiple has increased from 7.72x to 11.29x, indicating a higher valuation multiple applied to projected earnings.

Strategic positioning in MSR and Agency MBS portfolios enhances revenue and net margins through attractive spreads and hedging strategies.
Improved financing and economic leverage elevate earnings distribution, bolstering revenue growth and strong margins.
Rising interest rates, economic uncertainty, and increased competition may pressure Annaly's portfolio returns, market share, and profitability across various mortgage sectors.

Catalysts

About Annaly Capital Management

A diversified capital manager, engages in the mortgage finance business.What are the underlying business or industry changes driving this perspective?

Annaly Capital Management is well-positioned within its MSR business due to the lower profitability of mortgage lenders, which leads to a need to quickly offload MSRs. This could enhance revenue by acquiring MSR at attractive rates as originators seek liquidity.
The residential credit portfolio is expected to see growth through increases in securitization despite tighter credit spreads and greater issuance activities, suggesting an impact on revenue and potentially net margins as discipline remains a priority.
Agency MBS spreads remain attractive on an absolute and relative basis due to improved technicals and the ongoing Fed rate cutting cycle. Coupled with a conservative hedging strategy, this should enhance net interest margin.
The business is benefiting from a strategic shift in coupon allocation by positioning in higher coupon segments (6% and 6.5%) within its Agency MBS portfolio, potentially enhancing the economic return and net margins.
Improved financing costs and economic leverage, along with $400 million in accretive common equity raised, have set the stage for increased earnings available for distribution, thus supporting revenue growth and stronger margins moving forward.

Annaly Capital Management Earnings and Revenue Growth

Annaly Capital Management Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Annaly Capital Management's revenue will grow by 46.9% annually over the next 3 years.
Analysts assume that profit margins will increase from 53.7% today to 95.3% in 3 years time.
Analysts expect earnings to reach $3.2 billion (and earnings per share of $3.04) by about September 2028, up from $575.1 million today.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 7.0x on those 2028 earnings, down from 24.0x today. This future PE is lower than the current PE for the US Mortgage REITs industry at 14.1x.
Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 11.02%, as per the Simply Wall St company report.

Annaly Capital Management Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Rising interest rates and market volatility have led to wider mortgage spreads and could negatively impact Annaly's portfolio returns, posing a risk to future earnings growth.
High inflation and economic uncertainty may affect the U.S. housing market dynamics, potentially impacting Annaly's residential credit and agency MBS businesses' revenue and profitability.
Increased competition from private equity, asset managers, and insurance companies in the non-agency mortgage market could pressure Annaly's market share and margins.
Changes in GSE reform and the potential reduction of the GSE footprint could alter the competitive landscape of the mortgage market, impacting Annaly’s revenue from new opportunities.
Elevated hedging costs and prolonged periods of interest rate volatility could erode the returns on Annaly's Agency MBS investments, affecting overall 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 $21.023 for Annaly Capital Management based on their expectations of its future earnings growth, profit margins and other risk factors.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $3.4 billion, earnings will come to $3.2 billion, and it would be trading on a PE ratio of 7.0x, assuming you use a discount rate of 11.0%.
Given the current share price of $21.49, the analyst price target of $21.02 is 2.2% lower. 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.

Analysts Grow More Optimistic as Annaly Capital Price Target Rises Amid Market Shifts