Updated Aug 6 at 3:22pm ET.
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Federal Reserve Governor Lisa Cook stated that the risks of high inflation currently outweigh the risks to employment, suggesting the central bank is prepared to raise interest rates if prices do not cool. For a mortgage servicer like Mr. Cooper, higher rates are generally a positive.
When interest rates stay high, homeowners are less likely to refinance their mortgages. This keeps loans in Mr. Cooper's portfolio for a longer period, which preserves the value of its servicing rights. While high rates can slow down the creation of new loans, the company's massive existing portfolio becomes more profitable as the expected lifespan of those loans increases.
Analysts have recently shifted to a more cautious tone, marked by several downgrades and neutral ratings over the past few months. Six of the twelve analysts rate the stock a buy, but the average target of $118 is 44% below today's price.
Management has a long streak of beating expectations, though the last two quarters have been tougher. They generally set a bar they can clear.
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