Scaling the Platform Allows for Shift to Profitability; Initiate with Buy and $36 Target

研报英文原文证据摘录

Scaling the Platform Allows for Shift to Profitability; Initiate with Buy and $36 Target

Investment Summary

We are initiating coverage of Better Home & Finance (BETR) with a Buy rating and a $36 price target. BETR is well positioned from

a platform/technology standpoint to grow its business from the recently added partnerships. As that volume comes online we

expect BETR to achieve EBITDA break even in 4Q26 and then turn profitable in 2027. At the current valuation we see the upsideMORTGAGE potential from the scaling of the growth as more than compensating for the risks in further delays in ramping volumes.

Our $36 target is based on a 8.0x multiple on our 2028 adjusted EPS estimate of $4.50. Our target multiple is higher than the peer

origination multiples (6.4x median). We attribute this premium multiple to 2 factors: 1) We see faster growth potential for BETRAND

given the recently added partnerships combined with the current small size and 2) BETR's business model has a lower balance

sheet intensity given the partnership model. With BETR still pre-profitability we see the progress towards EBITDA break even and

scaling the business as the biggest catalysts towards achieving our target price.

Company OverviewSPECIALTY Better Mortgage is a technology enabled residential mortgage originator. The majority of BETR's origination volume is focused on

conventional (Fannie and Freddie) and Government (FHA/VA) mortgages, but BETR also originates non-Agency loans, including

HELOCs. BETR's business model is to originate (and fund the loan) and to sell the loan (either the GSEs or end investor for non-

Agency). The fact that the majority of BETR's business is for government mortgages reduces the balance sheet risk during the

aggregation period.