CS First Boston downgrades Metris Companies (MXT) to neutral from outperform.
Analyst Moshe Orenbuch says Metris has made significant progress in its turnaround efforts, regained access to funding markets, and seen significant improvement in its excess spreads.
The shares are currently selling at 1.3 times the expected 2005 year-end book value. But book value growth will likely be constrained by heavy reinvestment in marketing spending, and the capital structure of the company. While reinvesting in marketing spending is the right decision for the long-term value of the company, it's likely to limit upside in the stock in the near-term. Orenbuch maintains an $11 price target on the stock.