Jefferies Initiates Hold on UWM Holdings (UWMC) After $1.3B Two Harbors Deal

UWM Holdings Corporation (NYSE:UWMC) is one of the best NYSE stocks under $5 to buy. On December 19, Jefferies initiated coverage on UWM Holdings Corporation (NYSE:UWMC) stock with a Hold rating and a $5 price target. The firm stressed that ​UWM has strong structural positioning and high operating leverage heading into the next mortgage cycle. As such, the company is in a great position to benefit when volumes normalize and refinance activity returns.

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Jefferies also emphasized UWM’s long-term potential, citing several factors, including cost efficiencies from servicing insourcing expected by 2027, broker channel expansion, and AI-enabled processes. All of these, the firm stated, could enhance both volume and gain-on-sale margins. But despite these positives, Jefferies concludes that the stock price already incorporates “a material portion of the medium-term recovery narrative” for the mortgage industry.

Meanwhile, on December 17, UWM announced a definitive agreement to acquire Two Harbors Investment Corp. (NYSE:TWO) for approximately $1.3 billion. This all-stock transaction is UWM’s first major acquisition, which management stated is intended to transform the company into a top-tier mortgage servicer. In the deal, Two Harbors stockholders will receive 2.3328 shares of UWMC Class A Common Stock for every share of Two Harbors they own. And based on UWM’s closing price as of December 16, the deal values Two Harbors at $11.94 per share, a 21% premium over the 30-day volume-weighted average price of Two Harbors’ common stock.

UWM Holdings Corporation (NYSE:UWMC) is a wholesale mortgage lender. It originates, sells, and services residential mortgage loans through independent mortgage brokers across the US.

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Disclosure: None. This article is originally published at Insider Monkey.