COOP Stock Forecast & Price Target

Mr. Cooper Group Inc. has demonstrated significant growth in its Servicing segment, with the quarter-end servicing portfolio increasing to $1,556 billion, a 57% year-over-year rise, largely driven by the recent Flagstar acquisition. The company's originations funded rose by 36% quarter-over-quarter to $9.3 billion, indicating a gain in market share during the fourth quarter, which aligns with the industry's anticipated recovery in mortgage banking earnings. Additionally, management's revised expectations for return on equity (ROE) of 16-20% for 2025 and 2026, along with plans to reduce costs through technology and expand fee revenues, reinforce a positive outlook for Mr. Cooper Group Inc.'s stock.

The analysis underscores several fundamental concerns regarding Mr. Cooper Group Inc.'s financial outlook. The company's pull-through adjusted-lock gain-on-sale origination margins decreased to 1.19%, substantially below expectations, which negatively impacts profitability even in the face of origination volume growth. Furthermore, the refinancing recapture rate sharply declined to 35%, raising concerns about the company's ability to effectively manage operational costs and maintain normalized returns on equity in the context of risks such as declining volumes and potential increases in delinquency rates.