I'm reading alot of chatter about $25-26/sh BV for AGNC as of 6/30, which obviously is a huge premium to current px. But MBS has dropped SEVERAL POINTS since then, so current BV is probably closer to $23-24/sh. And MBS is likely to drop further in coming months as the economy shows continued signs of improvement and everyone realizes (if they haven't already) that bond prices have been artificially inflated by the Fed. So I'm thinking BV will probably stabilize around $21-22/sh in coming months, which means the stock px will likely stabilize around $18-19/sh, after which there will be a modest rally to get back to a ~5% disc to BV. Oh, and if that wasn't enough, all bets are off if an mREIT collapses from a margin call or other liquidity event during this process. Upside from there? If net interest margin really blows out, you'll see them increase dividends in 2014, which will be catalyst for rally back up into mid-20's (at best).
Let's assume for the sake of discussion that your forecast is correct, although I foresee a number of flaws in it. Once interest rates, and the share price, have stabilized, mreits will begin SPO's again and acquire MBS' at current rates which will increase the book value of their assets, thereby increasing share price.
The analysts have been all over the map with their price targets. They are all just wild guesses from a bunch of people that don't understand the business. Might as well take the PT from anyone on this board.
I'm not to sure about a rally because people base the value of a stock on how much they can sell it for in the future. It is pointless to value it on the present when you are not planning to sell. BV is declining so to own this stock one needs to value it for less than its current BV.
Facts say otherwise.
Fact is that tbill and mbs princing increased the last 2 times the Fed stopped buying these two types of bonds.
The economy isn't improving much - total employed is still nowhere near 2007 levels, hours worked are still way down, and wages are down. Inflation is almost zero - another indicator of weakness in demand and over capacity in production.
And if economy weakens, Feds are back to saying will continue to buy bonds just like they have been saying they will continue to do. So its a win win for bonds prices - when Fed stopped buying bonds in the past bond prices went up (interest rates down) and if economy weakens bond prices go up (interest rates down). Which makes AGNC an excellent place to hang out while waiting for the 30 year bond bull market to heat back up.