UPDATE: MLV & Co Initiates Coverage on ARMOUR Residential REIT with Buy Rating on Compelling Value
In a report published Tuesday, MLV & Co analyst Richard Eckert initiated coverage on ARMOUR Residential REIT (NYSE: ARR) with a Buy rating and $5.00 price target.
In the report, MLV & Co noted, “We are initiating coverage of ARR with a Buy rating and $5 price target. Currently the stock is trading at a 26% discount to book and at a yield of 21%. Even at our expectation of book value 12 months out and our projected dividends, which contemplate a 30% cut, the stock would be trading at a 16% discount to book and a yield of 15%. Ironically, consensus estimates and price targets do not differ materially from ours. The Street just seems to be applying a greater discount rate to estimates of future dividends and book values than we are. Given the size of these implied discounts, however, there are some that appear to embed the expectation of a missed margin call or two. We have elected to confine our analyses to the more plausible scenarios. We believe that as the more probable scenarios begin to inform investor expectations the difference between market value and book value will narrow. When that upside is combined with the mid-teens yield we are projecting, we believe ARR represents a compelling value.”
ARMOUR Residential REIT closed on Monday at $4.03.
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