Federal National Mortgage Association (FNMA) has introduced a new Fannie Mae backed mortgage product that accepts Bitcoin as collateral for down payments, through a partnership with Coinbase and Better Mortgage.

The Bitcoin backed mortgage launch comes after a period of pressure on the stock, with the share price down 14.8% over 30 days and 39.1% year to date, while the 3 year total shareholder return remains very large relative to the starting point.

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With FNMA stock down sharply over the past month and year, and trading at a steep discount to analyst price targets, the key question is whether this represents an underappreciated opportunity or whether the market already reflects any future growth.

Most Popular Narrative: 44.6% Undervalued

Based on the most followed narrative, Federal National Mortgage Association's fair value of $12.08 sits well above the last close at $6.70, which puts a spotlight on what is being priced into long term fundamentals.

The large $4.1 trillion guaranty book and role as the largest guarantor of U.S. residential mortgage debt put the company in a position to benefit as housing finance demand trends support sustained guaranty fee revenue and earnings.

Ongoing repricing of the guaranty book, with higher average guaranty fees in single family, supports the potential for a firmer net interest margin and can be a tailwind for net revenues.

Curious what kind of revenue path and margin profile could underpin that gap between price and fair value, and what future earnings level those assumptions lean on.

Result: Fair Value of $12.08 (UNDERVALUED)

However, you also need to weigh rising multifamily credit stress and tighter capital requirements. These factors could pressure margins and limit flexibility if conditions turn more challenging.

Next Steps

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.