UPDATE: Piper Jaffray Initiates Coverage On New Residential Investment Corp. On Differentiated Mortgage REIT

In a report published Friday, Piper Jaffray analyst Jason S. Deleeuw initiated coverage on

with a Neutral rating and $6.50 price target. In the report, Piper Jaffray noted, “We are initiating on NRZ with a Neutral rating and a $6.50 one-year price target, offering 7% upside potential from price appreciation and a ~12% yield from dividends. NRZ is a mortgage REIT that primarily holds servicing-related investments that carry a mid-teens plus ROE profile. We estimate over 80% of NRZ's $1.5 billion of equity is invested in assets that generally would increase in value in an improving macro environment and if long-term interest rates increase, making NRZ unique amongst mortgage REITs. We find NRZ's leverage to higher rates and dividend yield attractive; however, we believe NRZ's valuation premium to book value and peers already reflects those attributes. Our $6.50 price target is based on 1.20x CY15E book value of $5.52, which does not factor in a benefit from potentially higher long-term rates.” New Residential Investment Corp. closed on Thursday at $6.04.