As the Arbor Realty stock price slips, should you buy the dip?

By:
on Aug 3, 2023
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  • Arbor Realty published strong financial results last week.
  • The REIT’s quarterly revenue jumped to $108 million in Q2.
  • Analysts at Piper Sandler decided to downgrade the stock.

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Arbor Realty (NYSE: ABR) stock price has pulled back in the past few days as the market reflects on the recent financial results. The shares retreated to a low of $16 on Wednesday, down from the year-to-date high of $17.70.

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Strong financial results

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Arbor Realty Trust is one of the biggest REIT companies in the US. The firm runs multifamily loans and commercial products in the US. Some of its products are bridge financing, mezzanine & preferred equity financing, and in-house loan servicing among others.

The company published strong results last week. Its agency business originated loans worth over $1.4 billion while the total debt on its core assets jumped to over $12.1 billion. Its all-in debt cost came in at 7.25% while the net interest spreads in its core assets dropped to 2.08%.

Arbor Realty’s Structured Business segment’s portfolio dropped from $13.6 billion to $13.5 billion. Its liquidity came in at over $1 billion from the previous quarter’s $500 million. Liquidity is an important 

In all, Arbor Realty’s revenue rose by 15.15% year-on-year in the second quarter to over $108.5 million in the last quarter. Its earnings per share jumped to 41 cents, beating what analysts were expecting.

While Arbor Realty’s results were strong, the shares have dropped after Piper Sandler downgraded the company. The analysts downgraded the company from overweight to underweight.

In his downgrade, Crispin Love noted that the company was seeing higher non-performing loans (NLP). He also noted that the business will remain under pressure as originations slow, especially when the 10-year treasury remains at about 4%. He said:

“This is coming off an extremely low base, but we believe the credit environment over the next several quarters is likely to worsen prior to getting better once interest rates begin to move lower.”

Arbor Realty stock price forecast

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Arbor Realty stock

The daily chart shows that the Arbor Realty share price jumped to a high of $17.75 after the company published strong results. This rally was in line with my previous forecast. It then dropped sharply after the downgrade by Piper Sandler’s analysts.

The shares are sitting at an important support level since this price is the highest point in January 2022. It has moved above the 50-day and 100-day exponential moving averages The Relative Strength Index (RSI) moved from the overbought level of 80 to 56. 

Further, the MACD and the Stochastic Oscillator have drifted downwards. Therefore, the short-term outlook for the stock is bearish, with the next level to watch being at $15. In the longer term, however, the shares will likely resume the bullish trend and move above the resistance at $20.

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USA Real Estate REITs Stock Market