Annaly Capital Management
NLY
$18.30
+0.16%
Annaly Capital Management is a mortgage real estate investment trust (mREIT) that invests primarily in Agency mortgage-backed securities collateralized by residential mortgages, alongside non-Agency residential whole loans, securitized credit products, and mortgage servicing rights, operating across Agency, Residential Credit, Mortgage Servicing Rights, and Corporate & Other segments. As one of the largest and most established names in the mREIT space, Annaly is a benchmark holding for income-oriented investors, distinguished by its scale, diversified investment strategy, and heavy reliance on leveraged spread income rather than traditional property-level real estate operations. The current investor narrative is dominated by the tension between an extraordinarily high dividend yield above 13% and a sharply deteriorating share price, with the stock down roughly 19% year-to-date and nearly 19% over the past month alone. Recent commentary around a potentially more hawkish Federal Reserve leadership and balance sheet reduction has amplified concerns about Agency MBS spread widening and book value erosion, even as sell-side analysts maintain broadly constructive ratings and price targets well above the current market price.…
NLY
Annaly Capital Management
$18.30
Related headlines
NLY 12-Month Price Forecast
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Annaly Capital Management's 12-month outlook, with a consensus price target around $23.68 and implied upside of +29.4% versus the current price.
Average Target
$23.68
0 analysts
Implied Upside
+29.4%
vs. current price
Analyst Count
—
covering this stock
Price Range
$21 - $25
Analyst target range
Annaly is covered by 11 analysts with a consensus recommendation of "buy" and a recommendation mean of 1.92 (where 1.0 is a strong buy and 5.0 is a strong sell), indicating a moderately bullish stance. The average target price of $24.23 implies a substantial +30.9% upside from the current price of $18.50, which is a striking divergence from the stock's actual price action and suggests analysts are either significantly behind the curve or see deep value in the selloff. The consensus EPS estimate of $3.02 for the forward period, versus trailing EPS of $0.14, implies analysts expect a dramatic earnings recovery that would justify the target price, but this gap raises questions about the reliability of the estimates given the recent fundamental deterioration. The buy-leaning consensus is notable because it contrasts sharply with the market's verdict: the stock is down 18.5% in a month while analysts maintain overweight ratings, creating a classic "value trap versus opportunity" debate. The target range spans from a low of $22.50 to a high of $25.00, a relatively tight 11.1% spread that signals stronger analyst conviction than is typical for a stock in freefall. The low target of $22.50 still implies +21.6% upside and assumes the company stabilizes its book value and maintains its dividend, while the high target of $25.00 (+35.1%) would require multiple expansion toward 1.0x book value and a normalization of interest rate spreads. Institutional ratings show a consistent pattern of reaffirmations rather than upgrades or downgrades: JP Morgan, Wells Fargo, Piper Sandler, and RBC Capital have all maintained Overweight/Outperform ratings through 2026, with UBS the lone Neutral. The absence of any downgrades despite the 18.5% one-month decline suggests analysts view this as a rate-driven dislocation rather than a fundamental breakdown, but the market's violent rejection of the stock price indicates a significant disconnect between sell-side conviction and buy-side positioning.
Bulls vs Bears: NLY Investment Factors
The bear case currently has stronger evidence due to the relentless price decline, extreme leverage, and macro headwinds, but the bull case rests on a deep discount to book value and a massive gap between analyst targets and the market price. The most critical tension is whether the Fed's policy path will stabilize or further compress net interest spreads; if spreads widen, book value could erode further, but if they stabilize, the 13.16% yield and 0.89x P/B could attract value buyers. Analysts' consensus buy rating and $24.23 average target suggest they see the sell-off as overdone, but the market's violent rejection indicates skepticism about dividend sustainability and book value integrity. The single most important factor is the trajectory of interest rates and the Fed's balance sheet policy, which will determine whether NLY's spread income remains positive and whether the dividend can be maintained.
Bullish
- Deep discount to book value: NLY trades at a P/B ratio of 0.89x, an 11.1% discount to its estimated book value. For a leveraged mortgage REIT, this discount often signals market skepticism about book value quality, but it also provides a margin of safety if book value stabilizes. Historically, NLY's P/B has ranged from 0.68x to 0.97x, and the current level is not at an extreme, suggesting limited downside from a valuation perspective.
- Analyst consensus and target upside: All 11 covering analysts have a consensus 'buy' rating with a mean recommendation of 1.92 (where 1 is strong buy). The average target price of $24.23 implies 30.9% upside from the current $18.50, and even the lowest target of $22.50 offers 21.6% upside. This wide gap between analyst targets and market price suggests a potential mispricing if the company meets expectations.
- High dividend yield with earnings coverage: NLY offers a dividend yield of 13.16%, one of the highest in the mortgage REIT sector. The payout ratio is 92.8%, which is high but sustainable if net interest spreads remain positive. The most recent quarter showed EPS of $1.07, which comfortably covers the quarterly dividend of approximately $0.65 (implied by the annual yield), providing near-term confidence in the distribution.
- Recent earnings recovery: Q2 2026 net income surged to $822.7 million (EPS $1.07) from just $57.1 million (EPS $0.03) in Q2 2025, a 24.9% year-over-year revenue increase to $2.23 billion. This sharp rebound demonstrates the company's earnings power when interest rate spreads are favorable, and it contrasts with the stock's recent price decline, suggesting a disconnect between fundamentals and market sentiment.
Bearish
- Severe price downtrend and relative weakness: NLY is down 18.54% over the past month and 19.21% year-to-date, massively underperforming the S&P 500 (SPY) which gained 0.59% and 12.86% over the same periods. The relative strength over one month is -19.13%, and over six months it's -30.78%, indicating persistent selling pressure and a loss of investor confidence. The stock is trading just 2.1% above its 52-week low of $18.37, with no clear technical support below that level.
- Extreme leverage and liquidity risk: NLY operates with a debt-to-equity ratio of 6.95x and a debt ratio of 86.9%, typical for an mREIT but highly risky in a rising rate environment. The current ratio is a mere 0.035, highlighting a severe liquidity mismatch as short-term repo borrowings fund long-duration MBS. Any disruption in repo markets could force asset sales at fire-sale prices, eroding book value.
- Dividend sustainability concerns: The 13.16% dividend yield comes with a payout ratio of 92.8%, leaving almost no retained earnings cushion. If net interest spreads compress due to Fed policy or market volatility, the dividend could be cut, triggering a further sell-off. The trailing twelve-month free cash flow is negative at -$314.4 million, underscoring the cash flow strain.
- Earnings volatility and unreliable estimates: NLY's EPS has been highly erratic: $1.07 in Q2 2026, $0.33 in Q1 2026, $1.40 in Q4 2025, and $0.03 in Q2 2025. This volatility makes the forward EPS estimate of $3.02 seem overly optimistic and disconnected from the trailing EPS of $0.14. The PEG ratio of 0.095 is anomalously low and likely reflects distorted growth assumptions rather than genuine undervaluation.
NLY Technical Analysis
Annaly is in a clear and accelerating downtrend, with the stock down 10.63% over the past year and 19.21% year-to-date, and the current price of $18.50 sitting at just 2.1% above its 52-week low of $18.37 and only 75.4% of its 52-week high of $24.52. This positioning near the bottom of the annual range signals persistent selling pressure rather than a value opportunity, and the failure to hold the $20 level in late September suggests the market is repricing the stock's fundamental outlook rather than experiencing a temporary dip. The maximum drawdown of -24.18% confirms that this is a sustained capital destruction phase, not a routine pullback within an uptrend. Recent momentum is decisively negative and worsening: the 1-month change of -18.54% and 3-month change of -18.00% show that the decline has intensified rather than stabilized, with the most violent leg occurring in the final days of September and early October when the stock fell from $20.32 on September 29 to $18.50 on October 2. This short-term collapse diverges sharply from the broader market, as SPY gained 0.59% over the past month while NLY lost 18.54%, producing a relative strength of -19.13% over one month and -25.64% over one year. The 6-month change of -13.43% versus SPY's +17.35% (a -30.78% relative strength gap) indicates that Annaly has been a consistent underperformer across every time horizon, and the absence of any short-term stabilization suggests momentum remains firmly to the downside. Key technical levels are now compressed: immediate support sits at the 52-week low of $18.37, just $0.13 below the current price, and a breakdown below this level would open the door to new multi-year lows with no visible chart support. Resistance is layered at $20 (psychological), $21.23 (mid-September level), and the 52-week high of $24.52, which would require a 32.5% rally to reclaim. With a beta of 1.238, Annaly is approximately 24% more volatile than the broader market, meaning the current downtrend carries amplified downside risk for position holders, and the elevated volume of 17.1 million shares suggests institutional distribution rather than retail panic selling.
Beta
1.28
1.28x market volatility
Max Drawdown
-26.5%
Largest decline past year
52-Week Range
$18-$25
Price range past year
Annual Return
-12.4%
Cumulative gain past year
| Period | NLY Return | S&P 500 |
|---|---|---|
| 1m | -19.1% | +2.1% |
| 3m | -19.9% | +3.1% |
| 6m | -17.3% | +14.6% |
| 1y | -12.4% | +16.0% |
| ytd | -20.1% | +14.2% |
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NLY Fundamental Analysis
Annaly's revenue trajectory has been highly volatile but recently strong on a year-over-year basis, with Q2 2026 revenue of $2.23 billion representing 24.91% YoY growth versus Q2 2025's $1.79 billion. However, the sequential trend is less encouraging: Q1 2026 revenue was $1.63 billion, meaning Q2 rebounded sharply, but Q4 2025 revenue of $1.79 billion and Q3 2025 revenue of $1.63 billion show that the business oscillates significantly with interest rate movements and spread dynamics. The revenue segments data shows only Bank Servicing at $27 million and Interests in Mortgage Servicing Rights at $2.9 million, which are immaterial relative to the $2.23 billion total, confirming that the Agency MBS portfolio remains the overwhelming driver of results. The key concern is that this revenue growth is largely a function of interest income on a growing asset base rather than improving net interest spreads, as interest expense of $1.32 billion consumed 59.3% of the $2.23 billion in interest income during Q2 2026. Profitability is positive but erratic, with Q2 2026 net income of $822.7 million translating to a 36.8% net margin, a dramatic improvement from Q1 2026's $282.7 million (17.3% margin) and Q2 2025's $57.1 million (3.2% margin). The gross margin of 99.2% is typical for a financial company where cost of revenue is minimal, but the operating margin of 96.6% and net margin of 36.8% mask the extreme sensitivity of earnings to interest rate changes and unrealized gains or losses on the MBS portfolio. The EPS trajectory tells the real story: $1.07 in Q2 2026 versus $0.33 in Q1 2026 and just $0.03 in Q2 2025, showing that earnings are recovering from a near-zero base but remain well below the $1.40 reported in Q4 2025, indicating no stable earnings power. The balance sheet is highly leveraged and represents the primary risk: debt-to-equity of 6.95x, a debt ratio of 86.9%, and a current ratio of just 0.035 reflect the mREIT model of funding long-duration MBS with short-term repo borrowing. Free cash flow is deeply negative at -$314.4 million on a trailing twelve-month basis, and the Q1 2026 operating cash flow was -$1.40 billion, though Q2 2026 rebounded to +$1.62 billion, highlighting the extreme quarter-to-quarter volatility. ROE of 12.60% and ROA of 2.33% are respectable for the sector, but the payout ratio of 92.8% leaves virtually no retained earnings cushion, and the dividend yield of 13.16% is only sustainable if net interest spreads remain positive.
Quarterly Revenue
$2.2B
2026-06
Revenue YoY Growth
+24.9%
YoY Comparison
Gross Margin
99.2%
Latest Quarter
Free Cash Flow
$-314438000.0B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is NLY Overvalued?
Because Annaly reported positive trailing net income (EPS of $0.14 on a trailing basis and $1.07 in the most recent quarter), the PE ratio is the appropriate primary metric, and the trailing PE of 7.66x appears superficially cheap. However, the forward PE of 5.95x versus the trailing 7.66x implies the market expects earnings to grow, yet the forward estimate is based on analyst EPS projections of $3.02 that seem disconnected from the trailing $0.14 figure, suggesting the trailing EPS is distorted by unrealized losses or one-time items. The more reliable metric for an mREIT is price-to-book, and at 0.89x P/B, Annaly trades at a 11.1% discount to book value, which for a leveraged mortgage REIT typically signals market skepticism about the quality of the book value or expectations of further writedowns. Peer comparison within the mortgage REIT sector is challenging given the data provided, but the PS ratio of 2.14x and EV/EBITDA of 18.06x are elevated for a spread-lending business, while the P/CF ratio of 20.64x reflects the poor cash flow conversion. The PEG ratio of 0.095 is anomalously low and likely reflects a distorted earnings growth denominator rather than genuine undervaluation. The dividend yield of 13.16% is the highest in the sector and is the primary valuation support, but it also signals the market's concern about sustainability given the 92.8% payout ratio. Historically, Annaly's P/B ratio has ranged from 0.68x (Q3 2022) to 0.97x (Q2 2026), and the current 0.89x sits in the upper-middle of that range, suggesting the stock is not at a historical valuation extreme despite the price decline. The PE ratio history is more volatile, ranging from negative territory in loss quarters to 147x in Q2 2025, making historical PE comparison unreliable; the P/B metric is the more meaningful anchor, and at 0.89x, the market is pricing in modest book value erosion but not a catastrophic scenario. The forward PE of 5.95x versus the trailing 7.66x implies a 22.3% earnings growth expectation, which seems optimistic given the declining interest rate spread environment and the recent 18.5% one-month price collapse.
PE
7.7x
Latest Quarter
vs. Historical
Low-End
5-Year PE Range 1x~34x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
18.0x
Enterprise Value Multiple
Investment Risk Disclosure
Financial and operational risks for NLY are dominated by its extreme leverage, with a debt-to-equity ratio of 6.95x and a debt ratio of 86.9%, meaning that a small decline in asset values can wipe out a large portion of equity. The current ratio of 0.035 highlights a severe liquidity mismatch, as short-term repo borrowings fund long-duration mortgage-backed securities, and any disruption in repo markets could force asset sales at distressed prices. Additionally, the payout ratio of 92.8% leaves virtually no retained earnings, and the negative trailing free cash flow of -$314.4 million indicates that the dividend is not covered by cash flow, increasing the risk of a dividend cut if spreads compress. Revenue is heavily concentrated in the Agency MBS portfolio, with other segments contributing immaterial amounts (e.g., Bank Servicing at $27 million), so any adverse move in Agency spreads directly impacts overall results.
Market and competitive risks include the potential for further valuation compression if NLY's P/B ratio falls below its historical range of 0.68x to 0.97x, especially if book value erodes due to mark-to-market losses. The stock's beta of 1.238 makes it 24% more volatile than the broader market, and its recent underperformance (-18.54% in one month vs. SPY's +0.59%) suggests sector rotation away from rate-sensitive financials. Regulatory and macro headwinds, such as a hawkish Fed under Kevin Warsh that could accelerate balance sheet reduction, pose a direct threat to Agency MBS spreads. Competitive pressures from other mREITs and alternative income vehicles may also limit NLY's ability to maintain its dividend yield without sacrificing book value.
The worst-case scenario would involve a combination of rising interest rates, widening MBS spreads, and a dividend cut, leading to a sharp decline in both book value and investor confidence. In such a scenario, the stock could test its 52-week low of $18.37, representing a 0.7% decline from the current price, but a more severe sell-off could push it toward the historical low P/B of 0.68x, implying a price of approximately $14.15 (based on current book value per share of ~$20.82). This would represent a 23.5% downside from the current price. The maximum drawdown of -24.18% over the past year illustrates the potential magnitude of losses in an adverse environment, and with leverage amplifying losses, investors could face a 25-30% decline from current levels if the Fed's policies trigger a liquidity crisis in the repo market.