RITM Stock Forecast & Price Target

The positive outlook for Rithm Capital's stock is underpinned by a noteworthy 203 basis point sequential increase in book value per share (BVPS) to $12.56, primarily fueled by higher than expected pretax income and a reduction in mortgage servicing rights (MSR) marks. The company's MSR portfolio has demonstrated significant growth, with a 268 basis point rise quarter-over-quarter, leading to a fair value increase of approximately 11% to $10.3 billion, aided by expanded third-party servicing. Additionally, projections for operating earnings per share (EPS) have been revised upward for 2025 and 2026, indicating anticipated growth driven by increased asset management revenue and potential benefits from a lower interest rate environment.

Rithm Capital faces a negative outlook primarily due to the potential impact of federal monetary policy changes, particularly regarding agency mortgage-backed securities (MBS), which could lead to increased prepayment activity and lower reinvestment yields, adversely affecting earnings. Elevated prepayment rates may compress the net interest margin and decrease the valuations of mortgage servicing rights (MSRs), thereby diminishing the company's overall earnings power and dividend-paying capacity. Additionally, fluctuations in short-term interest rates could heighten funding costs and exacerbate leverage risks, further threatening the returns for common shareholders.