Merrill in for more woe, Goldman analyst says
More write-downs are on the horizon for New York-based Merrill Lynch & Co. Inc., according to a report from a Goldman Sachs analyst.
More write-downs are on the horizon for New York-based Merrill Lynch & Co. Inc., according to a report from a Goldman Sachs analyst.
William Tanona of The Goldman Sachs Group Inc. of New York downgraded the stock to “sell” and widened his third-quarter per-share loss estimate by $1 to $5.75.
Although Merrill Lynch said in July that it would take a $5.7 billion third-quarter write-down, following a $30 billion sale of collateralized debt obligations to Lone Star Funds of Dallas, Mr. Tanona foresees even bigger write-downs in the firm’s future.
He added Merrill Lynch to his “conviction sell” list and cut his six-month stock price target to $22 from $28.50.
“Merrill currently trades at the highest price-to-book multiple in our large-cap brokerage universe, despite having some of the most significant exposures to troubled assets such as collateralized debt obligations, mortgages and leveraged loans,” Mr. Tanona wrote in his report.
“With these markets still under pressure, we believe additional write-downs and book value deterioration will continue to plague the stock,” he wrote. “As a result, we see no reason why the stock should be trading at such a premium.”
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