RITM Stock Forecast & Price Target

Rithm Capital Corp has demonstrated a strong performance in its credit and real estate segments, as evidenced by an increase in assets under management (AUM) to $37 billion and a moderate rise in owned unpaid principal balance (UPB) to $597 billion. The company's origination volume remained steady at $16.4 billion for the quarter, reflecting its successful platform expansion, while core earnings for FY25 are projected to increase slightly to $2.20 and year-end book value is expected to rise to $13.23. Additionally, the market servicing rights (MSR) portfolio has grown by 30 basis points, indicating effective management in a challenging environment, which contributed to a book value per share increase to $12.83.

Rithm Capital's financial outlook appears negative primarily due to lower than anticipated total revenues of $965 million, significantly missing the projection of $1,125 million, which highlights deficiencies in net servicing revenue and substantial amortization losses. Additionally, ongoing declines in agency prepayment speeds pose risks to the valuation of mortgage servicing rights, with potential increases in mortgage rates leading to elevated prepayment activity that could compress net interest margins. The company's reliance on secured borrowing arrangements is also concerning, as periods of illiquidity in the mortgage markets may hinder access to capital due to declines in collateral value.