AGNC Investment: UBS maintains Neutral, raises PT to $9.75 from $9.5

AGNC Investment: UBS maintains Neutral, raises PT to $9.75 from $9.5

AGNC Investment Corp. (NASDAQ:AGNC), a prominent real estate investment trust (REIT) focused on agency mortgage-backed securities (MBS), has received a significant update from UBS. The investment bank has raised its price target for AGNC shares to $9.75 from $9.5, maintaining a neutral rating on the stock. This move comes amidst a challenging market environment characterized by interest rate volatility and MBS spread fluctuations [2].

UBS analysts cited AGNC's strong focus on agency MBS as a key factor in their decision to raise the price target. The REIT's strategy of maintaining an agency-skew in its investments has been viewed favorably by analysts, particularly in the face of macroeconomic uncertainty. AGNC's investment portfolio, valued at $78.9 billion as of the first quarter of 2025, provides a degree of safety and predictability that is valuable during periods of market uncertainty [2].

AGNC recently priced a public offering of 12 million depositary shares, with a liquidation preference of $25.00 per share, for gross proceeds of $300 million. The company intends to use the net proceeds from this offering to finance the acquisition of Agency securities, non-Agency securities, and other real estate-related assets. The offering is expected to close on or about September 10 [1].

Despite mixed financial performance in recent quarters, AGNC has expressed confidence in maintaining an adjusted EPS of approximately 35-45 cents in the near term, aligning closely with its quarterly dividend of 36 cents. The company's dividend yield stands at 14.75%, and it has maintained dividend payments for 18 consecutive years [2].

UBS analysts noted that while the current stock price appears to reflect market challenges, there is potential for outperformance if market conditions improve. The MBS market has experienced significant volatility, driven by factors such as interest rate fluctuations and changes in Federal Reserve policy. Analysts have noted that MBS spreads in the secondary market have room to tighten, which could benefit AGNC's portfolio valuation [2].

AGNC's agency-focused strategy has been viewed positively by analysts, particularly in the current economic climate. The company's emphasis on agency MBS provides a level of security and predictability that is valuable during periods of market uncertainty. Management has expressed confidence in the MBS market outlook, despite recent volatility. This optimism is based on the potential for spread tightening and the attractive returns available on new investments [2].

AGNC faces several risks and challenges, including interest rate sensitivity, MBS spread volatility, regulatory changes, market liquidity, and competitive pressures. However, the company's strong focus on agency MBS and its ability to capitalize on market opportunities while managing risk will be crucial to its success in the coming quarters [2].

References:
[1] https://seekingalpha.com/news/4492063-agnc-investment-announces-pricing-of-public-offering-of-depositary-shares
[2] https://www.investing.com/news/swot-analysis/agnc-investment-corps-swot-analysis-agency-mbs-focus-drives-stock-outlook-93CH-4218348