UPDATE: Morgan Stanley Initiates Coverage on Nationstar Mortgage on Growth Story, Multiple Positive Factors

In a report published Wednesday, Morgan Stanley analyst Cheryl M. Pate initiated coverage on

with an Overweight rating and $70.00 price target. In the report, Morgan Stanley noted, “Though NSM has outperformed servicing peers, we see additional upside to the stock from here as 1) servicing profitability doubles over the next 3 quarters, 2) retail origination mix increases and 3) HARP recapture remains robust. We believe NSM can double its servicing profitability through a combination of servicing efficiency gains, improving delinquencies, lower advance costs, and improving revenue margins. We forecast pretax core servicing margin improving to 10bps in 1Q14e and 12bps in 4Q14e from 5bps in 2Q13.” Nationstar Mortgage Holdings closed on Tuesday at $54.56.