Sticking with NationstarFollowing Thursday's drop in the share price, investors are looking at "an attractive entry point" for Nationstar, on the strength of its growing servicing business, according to Oppenheimer analyst Ben Chittenden. The analyst in a note to clients late Thursday also said that it was "not a point to sell for existing shareholders." Chittenden stuck with his "outperform" rating for the stock, but lowered his 12-18 month price target for the shares to $50 from $62, while lowering his 2013 EPS estimate to $3.05 from $4.80, and lowering his 2014 EPS estimate to $5.50 from $7.31. "We think this is the fundamental silver lining on an otherwise weaker quarter. Servicing will drive the vast majority of future earnings power; with profitability increasing, we view that as a positive," Chittenden wrote. He was also impressed with the growth of Nationstar's "high margin" SolultionStar subsidiary, which focuses on real estate sales and settlement services. This unit's revenue third-quarter revenue rose 34% sequentially to $51 million in the third quarter. FBR Capital Markets analyst Paul Miller on Friday also stuck with an "outperform" rating for Nationstar, although he lowered his price target to $45 from $65, "given a 2014 EPS expectation that is nearly one-third below our prior estimate."
Other OpinionsSterne Agee analyst Henry Coffee on Friday downgraded Nationstar to a "neutral" rating from a "buy" rating, while lowering his price target to $45 from $60. Coffee estimates Nationstar will earn $5.00 a share in 2014. "We are stepping to the sidelines to wait while the company reconfigures its operating platform to adjust to new origination targets, the closing of excess facilities, etc.," Coffee wrote. But even after the downgrade, Coffee struck a somewhat positive tone. "In addition to the prospects of additional new servicing, there are two other factors that could drive the shares higher: a) reduction in corporate debt. The company needs to evolve into a business that can grow revenue and EPS without increasing leverage; b) a reconfiguration of the servicing business into a structure that lowers the serving company's tax rate from 38% to an estimated 10%. The first item is critical in our view; the second worth noting," Coffee wrote. Morgan Stanley analyst Cheryl Pate on Friday downgraded Nationstar to "equal-weight" from "overweight," with a price target of $38. "Lower profitability in the originations business is the key driver to our reduced 2014e EPS of $4.30," Pate wrote in a note to clients. That's the lowest 2014 EPS ratio among the analysts listed here. "We expect continued pressure on gain on sale margins, partially offset by a higher consumer mix, and lower overall volumes with the sale to Stonegate. Additionally, we think it will take some time to get to the 125bps of core pre-tax profitability in originations that management targets as the cost base is right-sized," Pate wrote. NSM data by YCharts
Interested in more on Nationstar Mortgage Holdings? See TheStreet Ratings' report card for this stock. -- Written by Philip van Doorn in Jupiter, Fla. >Contact by Email. Follow @PhilipvanDoorn