FRIEDMAN BILLINGS DOWNGRADES FANNIE MAE TO MARKET PERFORM FROM OUTPERFORM
FBR analyst Paul Miller says he believes Fannie Mae (FNM) stock will trade close to book value over next few quarters due to uncertainty of impact from continued deterioration in the housing market and rising credit losses. He says, while management did not disclose new information on a conference call, the complexity of accounting policies surrounding credit reporting and market-to-market adjustment of assets add to already complexity of the company's financials.
Miller still believes governmentt sponsored enterprises will be big winners from current housing turmoil, but thinks investors will have to get a certain comfort level that charge-offs are stabilizing, which will take a few quarters. He cuts $60 target to $35, or 1.1 times book value of $31.75.
GOLDMAN CUTS ESTIMATES, TARGET ON E*TRADE FINANCIAL
Goldman Sachs analyst William Tanona says he sees limited near term relief in credit markets. He sees housing prices significantly deteriorating well into 2008, resulting in higher write-offs of mortgage-related assets in large-cap investment banking group. He also expects higher unemployment rates, deteriorating consumer credit trends.
Tanona believes industry trends will also suffer from lower origination and securitization activity, a shift into lower-margin agency products and lower risk appetite. He thinks geographic, product diversity will be key to a firm's stock performance in 2008.
For E*Trade (ETFC), he cuts $0.80 2007 EPS estimate to $0.42, $1.25 2008 to $0.90; cuts $15 target to $6. Rates neutral.
GOLDMAN CUTS CITIGROUP TO SELL FROM NEUTRAL
Goldman Sachs analyst William Tanona tells salesforce he added Citigroup (C) to Americas Sell List. Says, while Citigroup has fallen 40% year-to-date, he feels Citigroup will face many industry and firm specific challenges in the next six months that will ultimately drive underperformance vs. peers.
Tanona sees: additional write-offs on Citigroup's remaining $43 billion of collateralized debt obligation exposure; pressure on Citigroup to shore up Tier-1 capital ratios which may need to come from a stock infusion, asset sales or a dividend cut; deteriorating consumer credit trends and higher corresponding provisions and charge-offs; and no clear leadership.
He cuts $4.65 2008 and $5.20 2009 EPS estimates to $3.80 and $4.60.
CITIGROUP UPGRADES ECHOSTAR COMMUNICATIONS TO BUY FROM HOLD
Citigroup analyst Jason Bazinet says he's upgrading EchoStar Communications (DISH) based on attractive valuation and his ongoing conviction that there's a 65% chance that AT&T (T) will acquire DISH over the next 12 months. He says, at current levels he sees over 30% upside. He notes, over the past five days, the stock has fallen by more than 23%.
Bazinet thinks the market "has more than priced in the higher churn and related sub-prime," but is not factoring in the likelihood of T buying DISH.
He raises $1.78 2007 EPS estimate to $1.79, $2.27 2008 to $2.28. He continues to view $52 as fair value for shares.