MERRILL LYNCH DOWNGRADES PNC FINANCIAL, BANK OF AMERICA, SUNTRUST
Merrill Lynch analyst Edward Najarian says data suggests increases in bank credit losses and loan delinquencies are accelerating. He says he's concerned about rapidly rising losses in home equity and residential construction lending, given the precipitous fall in home prices. He thinks the Fed rate cuts and other central bank actions will ease the pain, but will not preclude a deep, protracted credit cycle.
On a core operating basis (excluding gains related to IPO of Visa (V)), Najarian sees nearly all large regional banks posting below-consensus EPS, including modest decline in 2008 EPS estimates, due to gains related to Visa. He expects a more significant drop in 2009.
He downgrades PNC Financial Services (PNC) to neutral from buy; and Bank of America (BAC) and SunTrust Banks (STI) to sell from neutral.
CITIGROUP UPGRADES YAHOO TO BUY FROM HOLD
Citigroup analyst Mark Mahaney says with Yahoo (YHOO) shares now trading at an 11% discount to Microsoft's (MSFT) initial $31 offer, and a 23% discount to a potential Microsoft $34 offer - which he considers reasonable, believes buying shares here provides attractive return.
Mahaney continues to view a Microsoft-Yahoo deal as the most likely outcome. While regulatory risk may be material, he continues to believe that limited combined market share allows the deal to go through. He thinks it's unlikely that Microsoft will walk away, as its share of U.S. online ad was flat to slightly down in 2007, Google's (GOOG) share of U.S. online ad has significantly increased, and no other step could potentially address the scale/liquidity challenge of Microsoft's ad platform.
Mahaney has a 34 price target on Yahoo shares.