ANNALY Capital Management (NLY) closed at $21.05, down 1.22 percent, while the S&P 500 rose 0.2 percent and the Nasdaq gained 0.4 percent. Over the past month, NLY has underperformed sharply—down 8.5 percent versus the Finance sector's 2.6 percent loss.
The sell-off ignores a powerful earnings setup. Analysts project Q1 EPS of $0.78, up 6.85 percent year-over-year, with revenue hitting $545 million—a 97.64 percent jump. For full-year 2025, consensus calls for $3.09 EPS and $2.03 billion in revenue, up 5.82 percent and 78.78 percent respectively.
Zacks has assigned NLY a #2 (Buy) rating. The stock trades at a 6.9 forward P/E, an 8 percent discount to the REIT and Equity Trust sector average of 7.5—an unusual discount for a company facing such strong near-term growth.
The thesis hinges on interest-rate positioning. NLY hedges long-term Treasury rates but not mortgage rates. Rising Treasury yields boost book value without increasing prepayment risk on its 5-6 percent coupon mortgage-backed securities. A sharp decline in mortgage rates would pose refinancing risk—but that tail scenario is lower-probability in a higher-rate environment.
Risks are real: NLY is a leveraged REIT highly sensitive to rate movements, MBS spreads, and repo costs. Prepayments and book value swings can pressure earnings. The REIT and Equity Trust industry ranks 216th out of 250 industries. Recent options activity—10,591 puts trading at six times expected volume—signals bearish short-term sentiment.
For value-oriented investors with a 12-18 month horizon and a view that rates stay higher, NLY's discount to peers combined with blowout earnings guidance offers an entry point worth monitoring into earnings.
