Ocwen Financial Corp (OCN) Could Be A Risky Gamble

Oppenheimer analyst Ben Chittenden is out today with a few insights on shares of Ocwen Financial Corp (NYSE:OCN), as the mortgage firm was hit with federal and state lawsuits for allegedly failing borrowers with mistakes, shortcuts and other problems that cost some people their homes. Ocwen shares closed today at $2.42, down $0.07 or -2.81%.

Chittenden commented, “We know that people are probably saying, “Wow, OCN down ~50% in one day, I need to get in.” Sure you could, but you could also go to the casino and bet at the craps table. As outsiders, we find it very hard to fully know the outcome of the announced cease and desist order/Consumer Financial Protection Bureau (CFPB) case. What we do know is that the order takes effect immediately and states that OCN will not be able to acquire mortgage servicing rights (MSRs), or originate or purchase residential mortgages for its servicing book, in 20+ states. This will exacerbate OCN’s issues as it prolongs the company’s inability to increase revenues (without replenishment, the headwind intensifies) and slow down expense growth (fighting this will be expensive).”

“At this point, we aren’t ready to call into question the company’s ability to survive this, but it does push out any potential turn in profitability. There may come a time when it’s worth exploring a long position in OCN; we just don’t think today is the day,” the analyst concludes.

As such, Chittenden reiterates a Perform rating on Ocwen shares, while no price target was provided.

According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Ben Chittenden has a yearly average return of -0.3% and a 50% success rate. Chittenden has a -40.5% average return when recommending OCN, and is ranked #3330 out of 4562 analysts.

Out of the four analysts polled by TipRanks in the past 12 months, one rates Ocwen stock a Buy, two rate the stock a Hold and one analyst recommends to Sell. With a return potential of 76%, the stock’s consensus target price stands at $4.25.


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