From Standard & Poor's Equity ResearchOPPENHEIMER DOWNGRADES WACHOVIA TO UNDERPERFORM FROM PERFORM
Oppenheimer analyst Meredith Whitney downgrades Wachovia (WB) despite the already dramatic decline in the shares and the fact it trading below tangible book value of $13.60, based upon her dramatically diminished EPS outlook.
Whitney notes one of her chief concerns is capital: given the stark disparity in underwriting assumptions between WB and its peers, WB and actual home price declines, she fears that the company will have greatest reckoning with asset re-valuation and/or credit costs.
With shrinking portfolio, she fears WB simply cannot cut costs fast enough to mitigate capital erosion; she believes WB may have reduced its portfolio by $50 billion in the second quarter.
She cuts $1.55 2008 EPS estimate to $1.35 loss, $2.65 2009 EPS estimate to $0.35 loss.
UBS REITERATES BUY ON GENENTECH
UBS analyst Maged Shenouda says Genentech (DNA) posted solid second quarter revenues of $3.24 billion, vs. his $3.23 billion estimate, driven mostly by U.S. Rituxan sales of $651 million vs. his $620 million forecast. Shenouda now sees Rituxan sales of $2.9 billion and $3.1 billion in 2008 and 2009, respectively, as the product reaches another step of growth.
Similarly, the analyst says Avastin beat his $640 million estimate by $10 million, with penetration in the metastatic breast cancer setting reaching 35%, up from 25% before.
The analyst says $0.82 second quarter EPS missed his $0.85 estimate, but excluding $50 million of cost of goods impairments and $33 million of deferred tax liability, he estimates DNA would have posted $0.88. The analyst notes that the company plans to more aggressively buy back stock as a use of excess cash.
Shenouda keeps 92 price target on the stock.