PennyMac downgraded to Market Perform from Outperform at Keefe Bruyette

Keefe Bruyette downgraded PennyMac Financial to Market Perform from Outperform with an unchanged price target of $102. The stock is up 11% since July 9 while the 30-year mortgage rate has fallen by just 15 basis points, the analyst tells investors in a research note. The firm says the market’s rate cut expectations imply a mortgage rate of 6% by July 2025, which would likely result in a moderate pickup in purchase volume but still relatively weak refinance activity. Keefe cites valuation for the downgrade, saying the stock’s multiple is are now at levels last reached during the Covid-19 boom period of late 2020/early 2021, when returns on equity were significantly higher than it forecasts through 2026.