A moat is often talked of as the element to make a company truly stand out from the pack. For Deutsche Bank analyst Ashish Sabadra, UWM Holdings Corporation (UWMC) is one such name in possession of the elusive quality.
After a conversation with UWM’s CTO, Sabadra came away believing UWM’s proprietary technology is its “key competitive differentiator.”
“The company has invested heavily in putting together a world class modern IT infrastructure that rivals the scale of much larger organizations and efficiently leverages a mix of modern technologies like the public cloud infrastructure and MSA API based software architectures with more traditional on-prem infrastructure,” the analyst said.
These serve to improve operations and costs, giving UWM the ability to deliver on the “’Cheaper, Faster, Easier’ initiative and offer industry leading times to close loans along with lower costs.”
It is an approach that is disrupting the staid mortgage industry, but the transformation hasn’t happened overnight; it is an ongoing process which has taken place over for the past decade. And only since 2015, has the focus on modernizing software really taken center stage. The company’s tech group now boasts 800 employees focused on developing a tech platform which has “enabled big barriers to entry given sheer scale.” All the work takes place in-house, which has allowed the company to streamline its cost process.
Despite the stock’s recent uptick, shares are still down by 11% since the company went public via a SPAC merger in January. Mortgage companies have had a rough ride recently as the yield on the U.S. 10-year Treasury note has been on the rise. Mortgage rates follow the note’s yield to a T, and rising rates are likely to drive customers away from taking out mortgage loans.
However, while Sabadra notes that these issues will continue to “grab headlines and investor mindshare,” the analyst expects UWM to continue to deliver a best-in-class customer service and keep on “gaining share of the wholesale mortgage channel and developing a robust recurring MSR revenue stream.”
Accordingly, Sabadra has a Buy rating on UWM shares, backed by a $12 price target. The figure implies a 21% upside from current levels. (To watch Sabadra’s track record, click here)
Overall, IUWM is driving positive sentiment from the analyst community. This ‘Strong Buy’ received 4 Buy ratings vs 1 Hold over the last three months. At $11.60, the average price target is set to provide gains of ~17% over the next 12 months. (See UWMC stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.