Rithm Capital stock rebounds after six straight sessions of losses

Rithm Capital (RITM) saw a minor recovery on September 26, closing at $11.62 after a decline of 7.09% over the past week due to a market reaction following its $1.6 billion acquisition of Paramount Group.

The acquisition aims to enhance Rithm's owner-operator model, though it may require capital upgrades for the acquired properties and comes amid rising mortgage rates that could negatively impact the company's earnings from origination and servicing.

To strengthen its capital base post-acquisition, Rithm is conducting a public offering of 7.6 million preferred shares and has filed to sell up to $750 million in common stock.

Analysts maintain a Hold rating on RITM, while year-to-date the stock has increased by 7.29%, though it currently trades 5% below its 20-day moving average, with Wall Street also showing strong buying interest.

Investment Recommendation: Hold

Rithm Capital (NYSE:RITM), a mortgage real estate investment trust (REIT), experienced a positive trading session on Friday, September 26, after suffering through six consecutive days of losses. The stock closed up 0.17% at $11.62.

Despite this slight recovery, RITM has seen a decline of 7.09% during the past week as investors reacted to the company’s recent acquisition of Paramount Group (PGRE) for approximately $1.6 billion. This strategic purchase is anticipated to bolster Rithm's owner-operator model, as Paramount’s asset portfolio is located in urban areas poised for a rebound in office market conditions.

However, the completion of this acquisition may necessitate capital upgrades for several buildings within the Paramount portfolio. At the same time, mortgage rates have started to rise after a period of decline, raising concerns for Rithm Capital. A significant portion of the company's earnings originates from mortgage origination and servicing, which could be adversely affected by these increasing rates.

On a notable down day, September 22, RITM’s shares fell by 2.23%, closing at $11.84. In light of the Paramount acquisition, Rithm Capital is actively seeking to bolster its capital base. The company has initiated a public offering of 7.6 million preferred shares, aiming to raise roughly $190 million. Additionally, Rithm has filed to sell up to $750 million in common stock through an at-the-market equity offering.

Year-to-date, RITM shares have experienced a 7.29% increase; however, they are currently trading 5% below their 20-day moving average. Analysts have assigned a Hold rating for the stock, while Wall Street experts have issued a Strong Buy recommendation.