Market Overview

MGIC Downgraded As Shares Close In On BofA's Price Target

MGIC Downgraded As Shares Close In On BofA's Price Target
Related MTG
25 Stocks Moving In Tuesday's Pre-Market Session
Earnings Scheduled For October 17, 2018

Shares of mortgage insurer MGIC Investment Corp. (NYSE: MTG) have gained about 5 percent since the lows reached after price cuts were announced in April, leaving limited room for upside, according to Bank of America Merrill Lynch.

The Analyst

Analyst Mihir Bhatia downgraded MGIC from Neutral to Underperform and maintained an $11.50 price target.

The Thesis

MGIC's valuation is likely to be capped until prices stabilize and clarity emerges on capital standards, Bhatia said in a Wednesday note. Mortgage insurance stocks hinge on "potential changes in the competitive and regulatory landscape," and MGIC's stock slipped about 17 percent after the April price cut, the analyst said.  

Price competition could be receding, as the company recently added granularity to its borrower-paid rate card and brought its pricing in line with peers, Bhatia said.

Investors are unlikely to return to the stock immediately, the analyst said. 

"While we expect capital changes to be manageable, we think legacy insurers (like MTG) are most at-risk for negative surprises." 

Near-term operating metrics should remain favorable, as the mortgage insurer benefits from pre-crisis mortgages running off, Bhatia said. MGIC is likely to grow insurance in-force and maintain operating expenditure discipline over the next couple of years, he said. 

"With MTG already trading at a premium to peer Radian Group Inc (NYSE: RDN), we think upside potential is limited," the firm added.

The Price Action

MGIC shares were down 0.98 percent off the open Wednesday. 

Related Links:

Insurance Companies Boost Usage Of Bond ETFs

Getting Tactical With Financial Services ETFs

Latest Ratings for MTG

Aug 2018Bank of AmericaMaintainsUnderperformUnderperform
Aug 2018B. Riley FBRMaintainsBuyBuy
Apr 2018Wells FargoDowngradesOutperformMarket Perform

View More Analyst Ratings for MTG
View the Latest Analyst Ratings

Posted-In: Bank of America Merrill Lynch Mihir BhatiaAnalyst Color Downgrades Price Target Analyst Ratings Best of Benzinga


Related Articles (MTG + RDN)

View Comments and Join the Discussion!

Latest Ratings

DESPKeyBancInitiates Coverage On0.0
MELIKeyBancInitiates Coverage On0.0
ABTCredit SuisseInitiates Coverage On82.0
View the Latest Analytics Ratings
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
Your weekly roundup of hot topics in the exciting world of fintech.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

10 Biggest Price Target Changes For Wednesday

Momentum ETFs: They'll Work Until They Don't