Should You Buy AGNC Stock While It's Below a $10.50 Price Target?

Core Viewpoint - The article discusses AGNC, a mortgage real estate investment trust (mREIT), highlighting its high forward yield of 14.75% and the impact of recent Federal Reserve interest rate cuts on its performance and stock valuation. Group 1: Interest Rate Impact - The Federal Reserve's rate cuts in 2024 and 2025 are expected to shift income investors back to high-yield dividend stocks like AGNC, which currently trades below Wall Street's price target of $10.50 per share [2][9] - AGNC's business model is sensitive to interest rate fluctuations, requiring rates to remain in a "Goldilocks zone" for consistent profitability [6][4] Group 2: AGNC's Portfolio and Strategy - AGNC allocates 89.1% of its $82.3 billion portfolio to Agency MBS assets, which are backed by government entities, providing a level of protection against housing crises [5] - The company engages in repo transactions to generate cash for future MBS purchases, with profits dependent on the spread between interest paid on loans and yields from MBS [7][8] Group 3: Financial Performance Metrics - AGNC's net spread and dollar roll income per share has fluctuated, with a decline from $0.53 in Q2 2024 to $0.38 in Q2 2025, while its tangible net book value per share decreased from $8.40 to $7.81 over the same period [11] - Analysts project a 15% drop in AGNC's earnings per share (EPS) to $1.59 in 2025, with a slight recovery expected in 2026 [12] Group 4: Investment Considerations - Despite the potential for AGNC's stock to rise to $10.50, it is suggested that the stock may still be risky due to potential volatility in interest rates and the preference for traditional REITs with simpler business models [13]