Analyst Actions: Wachovia, Genentech

Analyst Actions: Wachovia, Genentech


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 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.

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