CITIGROUP CUTS WASHINGTON MUTUAL TO SELL FROM HOLD
Citigroup analyst Bradley Ball says he expected some measures that Washington Mutual (WM) announced today, but the magnitudes are generally worse. He says the company's desperate measures reflect a poorly managed business and excessive exposure to subprime and second lien home equity.
Ball believes while capital and liquidity should now be stable, there is little left to support any near-term growth. He thinks further credit deterioration could put a drag on any growth in foreseeable future. He notes there is possible further negative press, and fundamental implications related to New York Attorney General inquiry into mortgage appraisal practices.
He cuts EPS estimates of $2.20 for 2007 to $0.08, $2.00 2008 EPS to $0.08 loss. He cuts $21 target to $15.
BEAR STEARNS DOWNGRADES MEDAREX
Bear Stearns analyst Akhtar Samad says Medarex's (MEDX) missed endpoint in a Phase 3 trial in melanoma compromises odds of FDA approval (previously the key catalyst in 2008) and raises risk for remaining Phase 3 trials with Ipilimumab.
He notes Ipilimumab failed to meet primary endpoint to rule out a best objective response rate (ORR) in Phase 3 second line melanoma monotherapy open label trial with an Special Protocol Assessment (SPA). He notes most "responses were ongoing at end of observation period," and responses at highest doses showed a delayed response effect.
Samad sees no major near term catalysts beyond partner BLA filings, and estimates fair value on sum-of-parts at $9. He cuts to peer perform from outperform.
NEEDHAM UPS ESTIMATES, REITERATES BUY ON TEXAS INSTRUMENTS
Analyst Quinn Bolton says Texas Instruments (TXN) revised its fourth quarter revenue and EPS guidance toward the higher end of its prior range. He believes new guidance implies higher gross margins than he previously modeled. If this is correct, he says his gross margin estimates for 2008 may prove conservative.
Bolton says he is encouraged by TXN's gross margin improvement, continued strong order rates, lean channel inventories, better-than-expected orders from its wireless handset customers, and its continued execution, especially in the analog business.
He raises $1.74 2007 EPS estimate to $1.80, $2.10 for 2008 to $2.15. He continues to believe TXN should be a core technology holding. He keeps target at $42, or about 20 times his 2008 EPS estimate.