PennyMac Financial upgraded to Overweight from Equal Weight at Wells Fargo

Wells Fargo analyst Michael Kaye upgraded PennyMac Financial to Overweight from Equal Weight with a price target of $75, up from $54, as he believes the backdrop for the mortgage industry has turned more favorable. Inflation is an important factor for interest rates, and mortgage rates have already improved -104bps from the peak after the softer CPI data. Kaye expects further improvement as inflation pressures abate. While the winter months will be challenging especially from a seasonality perspective, the analyst thinks the worst is behind the industry. The risk is that we are early and that the interest rate drop reverses or remains stubbornly high, he adds.