Wedbush boosts Freddie Mac target, still cautious on shares

Wedbush raised the firm’s price target on Freddie Mac to $2 from 75c and keeps an Underperform rating on the shares. Wedbush says shares of both Fannie Mae (FNMA) and Freddie Mac (FMCC) have moved higher over the past few months on improving investor sentiment post-election and a recent amendment to the preferred stock purchase agreements, which per the Treasury Department press release was meant to “help ensure that the eventual release of the GSEs from conservatorship will be orderly.” The firm acknowledges the odds of a conservatorship exit have risen following Trump’s victory, but remains cautious on the common shares of both names, citing the “significant” amount of capital that the companies would likely need to raise to meet current regulatory capital requirements. A s such, ownership dilution that could occur as a result, the analyst tells investors in a research note. Wedbush also believes that a continuation of the status quo, or no conservatorship exit, “remains a distinct possibility, and could result in little to no fundamental value for either the common or junior preferred shares.”