With the housing industry still largely in disarray, it’s no surprise that mortgage stocks like UWM Holdings (NYSE:UWMC) might be hurt in the process. And with UWM stock down over 15% at the time of writing, “hurt” might be an understatement.
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The biggest reason for the hit UWM took stems from its first quarter earnings report, which really didn’t go UWM’s way. UWM posted a loss of $0.07 per share in earnings and brought in $161.27 million in revenue. That last part doesn’t sound so bad until you consider that it represents an 80.4% drop against this time last year. It’s also barely half of the $302.4 million analysts expected UWM would bring in.
That was a disaster, and it can mostly be traced back to one key point: the value of mortgage servicing rights (MSRs). Those were worth substantially more in the past than they are currently, and with that loss comes a big loss in UWM’s revenues. There are some signs of improvement; margins were up significantly, and UWM also originated significantly more in mortgage loans than even its leading competitors in the field. However, the hit was bad enough as it was, and given the state of the housing market, that may not improve soon.
Analysts are also fairly skeptical about UWM’s chances going forward. With one Buy rating, six Holds, and three Sell, UWMC stock is currently considered a Hold. Further, with an average price target of $4.28, it offers 12.38% downside risk to shareholders.
