Mizuho Believes Fannie Mae Is Among The Best Businesses One Could Hope For — But Not Everyone Agrees

• Analysts at Mizuho called Fannie Mae and Freddie Mac the backbone of the U.S. secondary residential mortgage market, which is worth $14.3 trillion.
• The firm stated that Fannie Mae’s guarantee business is a high-quality, fee-based model with broad geographic exposure and implicit government support.
• Mizuho assigns a 30% probability that Fannie Mae exits government conservatorship by 2028 and a 20% probability for Freddie Mac, both slightly above market-implied expectations.

Shares of Federal National Mortgage Association (FNMA), commonly known as Fannie Mae, were in focus in Monday’s opening trade after analysts at Mizuho initiated their coverage of the stock with an optimistic note.

According to TheFly, Mizuho has a price target of $10 on Fannie Mae, with an ‘Outperform’ rating. The firm sees an upside of more than 12% from current levels.

Fannie Mae shares were up nearly 10% in Monday’s opening trade. FNMA was among the top trending tickers on Stocktwits at the time of writing.

Why Is Mizuho Bullish On Fannie Mae?

Analysts at Mizuho called Fannie Mae and Freddie Mac the backbone of the U.S. secondary residential mortgage market, which is worth $14.3 trillion.

The firm stated that Fannie Mae’s guarantee business is a high-quality, fee-based model with broad geographic exposure and implicit government support. Mizuho also called Fannie Mae’s core guarantee franchise as being “amongst the best businesses one could hope for.”

Mizuho assigns a 30% probability that Fannie Mae exits government conservatorship by 2028 and a 20% probability for Freddie Mac, both slightly above market-implied expectations.

Others Are Not As Optimistic

Wedbush analyst Michael Piccolo downgraded Fannie Mae to ‘Neutral’ from ‘Outperform’ with an unchanged $8 price target.

Piccolo stated that Fannie Mae’s first-quarter (Q1) results came in slightly below expectations, though expense control stood out. He also noted that momentum toward an IPO or recapitalization has likely stalled until after the midterms, even as the company continues to improve efficiency and build capital.

Fannie Mae reported its first-quarter (Q1) earnings last week, with revenue of $7.3 billion compared to an expected $7.25 billion, according to Fiscal.ai data.

According to Koyfin data, the average 12-month price target for FNMA is $12.5, implying an upside potential of nearly 42% from current levels. Of the five analysts covering the stock, two have a ‘Buy’ rating, two recommend ‘Hold’, while one analyst has a ‘Strong Sell’ suggestion.

How Did Retail Traders React?

Retail sentiment on Stocktwits around Fannie Mae trended in the ‘extremely bullish’ territory, with message volumes at ‘high’ levels at the time of writing.

One bullish user called the surge in Fannie Mae shares a policy-sensitive churn.

Another user cautioned that the FNMA stock is highly dependent on regulatory policy.

FNMA stock is down 17% year-to-date, but up 41% over the past 12 months. The Clough Select Equity ETF (CBSE) is up 53% over the past 12 months.

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