Analyst: The market is underestimating the probability of the "two GSEs" returning to the stock market

Golden Ten Data, May 8 – According to Mizuho Securities analyst Dan Dolev, after heated discussions about Fannie Mae and Freddie Mac have cooled down, investors are underestimating the possibility of these two mortgage giants being relisted. This week, Dolev initiated coverage of both companies for the first time and gave a “Buy” rating. His base-case scenario assumes that Fannie Mae has a 30% probability of exiting government conservatorship before 2028, while Freddie Mac has a 20% probability. He stated that as tensions in the US-Iran conflict ease, allowing these two companies to return to public markets may receive greater priority on the Trump administration’s agenda. “The market assigns too low a probability for them to be listed before 2028. We think the probability is slightly higher.” Expectations that the Trump administration could end 17 years of government control once drove shares of both companies significantly higher in 2024 and 2025. However, since the beginning of the year, due to a lack of clear government planning, stock prices have plunged, and Fannie Mae and Freddie Mac’s OTC prices have nearly halved compared with their peaks in September. Dolev has set a price target of $10 for Fannie Mae, about 25% above its latest closing price, and $9 for Freddie Mac, about 26% above its latest close.