On Thursday, BTIG reaffirmed its Buy rating on Guardant Health (NASDAQ:GH), maintaining a price target of $45.00 for the company's shares. The firm's stance is based on the belief that the stock's valuation has the capacity to handle a slightly higher leverage, potentially over 6 times, particularly if there is an increased likelihood for the yield curve to become steeper.
The analyst from BTIG indicated that, in the short term, Guardant Health's stock could rise above 0.90 times the net asset value (NAV) if market volatility continues to decrease or if there is a significant increase in bulk Mortgage Servicing Rights (MSR) sales by originators. Conversely, the stock might face a downside, possibly falling slightly below 0.80 times NAV, in the event of sudden market volatility, which could likely be triggered by strong inflation data.
BTIG's analysis suggests that mortgage spreads are more likely to contract relative to interest rates if the 10-year Treasury yield is on an upward trend. However, spreads could expand during a market sell-off.
The firm looks ahead to key economic indicators in the coming days, with revisions to Gross Domestic Product (GDP) and core Personal Consumption Expenditures (PCE) price index data expected next week. Additionally, the ADP employment numbers and payroll data for May will be released on June 5 and June 7, respectively.
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