UPDATE: J.P. Morgan Initiates PennyMac Financial Services at Neutral on Current Uncertainty

In a report published Monday, J.P. Morgan analyst Richard Shane initiated coverage on PennyMac Financial Services PFSI with a Neutral rating and $21.00 price target.

In the report, J.P. Morgan noted, “We are initiating coverage of PennyMac Financial Services with a Neutral rating and a $21 price target (December 2013). We believe the current share price reflects uncertainty in the residential mortgage sector and PFSI's growth potential. We expect that higher rates and wider mortgage spreads may dampen volumes and compress margins. We think the market environment reduces earnings visibility and increases volatility. Long-term, we believe PFSI is building an attractive platform for the origination and servicing of residential mortgages, and that the platform is designed to be dynamic as government support of the mortgage markets recedes.”

PennyMac Financial Services closed on Friday at $21.80.