NLY: Mixed Street Views And Flat Buybacks Are Expected To Shape Balanced Returns

Analysts trimmed the average price target on Annaly Capital Management by about $0.20 to $24.00. This reflects small tweaks to discount rate, profit margin and forward P/E assumptions after a mix of recent target hikes and cuts across the Street.

Analyst Commentary

Recent Street research on Annaly Capital Management shows a split between analysts increasing and trimming their targets, with several target hikes clustered closely together and two more recent cuts from JPMorgan and another firm. Here is how that shakes out for you as an investor trying to make sense of the risk and reward trade off.

Bullish Takeaways

Bullish analysts see enough support in Annaly's execution to justify multiple target raises of between $1 and $3, which suggests they view the current P/E assumptions as reasonable for the business model.
The series of upward target revisions from multiple firms in a short window points to confidence that management is doing what it needs to do operationally, whether that is in portfolio positioning, funding or expense control.
Some of the target increases imply that bullish analysts are comfortable assigning a valuation that sits above prior levels, even after adjusting discount rate and profit margin inputs. This can be a sign they see the risk reward profile as acceptable.
The fact that both JPMorgan and other large firms were among those previously lifting targets indicates that positive views are not limited to smaller shops. That can add weight to the constructive side of the debate.

Bearish Takeaways

The more recent target cuts, including the $2 reduction at JPMorgan and the $3 reduction at another firm, highlight that some bearish analysts are rethinking how much they are willing to pay for Annaly on forward earnings.
These trims in price targets, combined with updated discount rate and margin assumptions, signal concern that previous valuation levels may have been too optimistic for the risk profile.
The spread between the higher and lower targets indicates that conviction on execution quality and earnings durability is not uniform. This can add volatility around results and macro data points.
With both upgrades and downgrades in the mix, the recent pullback in the average target to $24.00 suggests that bearish analysts are exerting more influence at the margin, especially on how they value future cash flows and capital allocation.

What's in the News

The company reported that from October 1, 2025 to December 31, 2025 it repurchased 0 shares for $0 million, equal to 0% of shares, under its buyback program. (Key Developments)
Management indicated that, with this update, the buyback program announced on January 2, 2025 is described as completed with a total of 0 shares repurchased for $0 million. (Key Developments)
The absence of executed repurchases under the authorized buyback may be relevant if you were expecting share count reduction or capital returns via this program. (Key Developments)

Valuation Changes

Fair Value: trimmed from $24.18 to $24.00, a small reduction that keeps the updated figure very close to the prior estimate.
Discount Rate: adjusted slightly from 9.04% to 9.03%, leaving the required return assumption effectively unchanged.
Revenue Growth: remains at about 3.67%, with the updated figure essentially matching the prior assumption.
Net Profit Margin: eased from about 87.70% to about 86.39%, a modest adjustment that still assumes a very high margin profile.
Future P/E: moved from about 11.85x to about 11.94x, indicating a slightly higher earnings multiple in the updated model.

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Key Takeaways

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 3.7% annually over the next 3 years.
Analysts assume that profit margins will increase from 78.5% today to 86.4% in 3 years time.
Analysts expect earnings to reach $2.3 billion (and earnings per share of $2.86) by about April 2029, up from $1.9 billion today. However, there is some disagreement amongst the analysts with the more bullish ones expecting earnings as high as $2.5 billion.
In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 11.9x on those 2029 earnings, up from 8.8x today. This future PE is greater than the current PE for the US Mortgage REITs industry at 9.1x.
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 9.03%, as per the Simply Wall St company report.

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 $24.0 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 analysts, you'd need to believe that by 2029, revenues will be $2.7 billion, earnings will come to $2.3 billion, and it would be trading on a PE ratio of 11.9x, assuming you use a discount rate of 9.0%.
Given the current share price of $22.8, the analyst price target of $24.0 is 5.0% 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.

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