Freedom Broker calls AMREP Corporation an attractive speculative idea for investors seeking exposure to a rising U.S. mortgage market. The small-cap landowner and residential real estate developer from New Mexico is expected to release a positive quarterly earnings report this week, Freedom Broker analysts said. This could give a boost to the company’s shares of 10-20%.

Details

Freedom Broker has issued a short-term trade idea to clients to buy shares of AMREP Corporation ahead of the release of its quarterly earnings, which are expected on Friday, September 12, although the company has not made an official announcement.

AMREP has a good shot of reporting solid financials, supported by the recent decline in U.S. mortgage rates, according to a note from Freedom Broker seen by Oninvest. The average rate on the 30-year fixed mortgage dropped 16 basis points to 6.29% on Friday, September 5, following the release of a weaker-than-expected August employment report. It marks the lowest rate since October 3 and the biggest one-day drop since August 2024, writes CNBC. 

Another argument in favor of AMREP showing healthy results is the low base of the previous quarter, Freedom Broker argues. Revenue for the last quarter declined 42.8% to $11.2 million from $19.5 million a year earlier.

Stock performance

Since the beginning of the year, shares of AMREP are off a third. However, a positive earnings report could lift them by 10-20%, Freedom Broker estimates. Its analysts set have set a two-month target price of $23.50 per share and recommend exiting the stock if it falls below $19.12 per share. At the close on Friday, September 5, AMREP was quoted at $21.06 per share. Thus, Freedom Broker’s target implies upside of nearly 12%.

“Low transparency due to minimal analyst coverage reduces the company’s visibility to investors,” Freedom Broker wrote. "Positive news... could attract the attention of speculators, pushing the stock price into the $23-27 per share range. This is especially likely given the 1.8% year-over-year increase in home prices in New Mexico."

Freedom Broker analysts point out that AMREP shares are currently trading at a discount to the value of its Rio Rancho, New Mexico, land bank and to earnings, with a P/E ratio of about 13.5 versus roughly 14.5 for peers. “The undervaluation provides fuel for a potential rally, while downside risks are cushioned by AMREP’s strong balance sheet,” the note said.

Freedom Broker also highlights that the company has yet to participate in the recent small-cap rally. Over the last month, AMREP shares have fallen 5.5%, while the Russell 2000 small-cap benchmark has gained almost 8.0%.

Besides Freedom Broker's, the company has only one other analyst rating, according to MarketWatch: a "buy" with a target price of $27 per share, implying 28% upside from current levels.

The AI translation of this story was reviewed by a human editor.

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