Compass Point analyst Fred Small downgraded to"neutral" from "buy," citing valuation.
PennyMac's stock currently trades in the historical 6x to 8xforward EPS range after bouncing back from the historically low levels seen inthe first quarter, Small said. Additionally, the company may encounter a morecompetitive environment and incremental margin compression in 2017 thanks toits current rate of originations and strong profitability, he noted.
"We may well be too early stepping off the PFSIexpress, but with shares trading back in the historical 6-8x range, we willwait for a clearer opportunity," Small wrote.
The analyst raised his price target to $19.00.
He updated his EPS estimates for 2016 to $2.71 from $2.46and for 2017 to $2.98 from $2.33. His EPS estimate for 2018 is $2.99.