Markets & Finance

Analyst Actions: AIG, Keycorp, WebMD


From Standard & Poor's Equity ResearchCITIGROUP CUTS PRICE TARGET FOR AMERICAN INTERNATIONAL GROUP

Citigroup analyst Joshua Shanker says that despite new funds (AIG (AIG) recently raised $20 billion in capital), it's not clear AIG's capital position is sufficient, as he thinks it merely adds capital sufficiency for AIG Financial Products Group without increasing former capital adequacy to the holding company. If AIG needs to funnel the funds to its subs, rating agencies could suggest an increase in the capital cushion.

Shanker thinks recent material losses and need to raise capital have weakened investor confidence in management that ardently stated its confidence in AIG's excess capital position, strong balance sheet and ability to avoid such losses.

He raises $2.70 2008 EPS estimate to $2.94, but cuts $5.95 2009 forecast to $4.40. He lowers his price target to 41 from 47. He keeps a hold opinion on the stock.

RBC CAPITAL CUTS ESTIMATES, TARGET FOR KEYCORP

RBC Capital analyst Gerard Cassidy says Keycorp (KEY) now anticipates 2008 net charge-off ratio will be 1.00%-1.30%, vs. prior guidance of 0.65%-0.90%. He cuts $1.80 2008 operating EPS estimate to $1.00 and $2.10 forecast for 2009 to $1.60 on greater-than-expected credit costs for next 12-18 months.

Cassidy notes if his bearish outlook on credit for KEY and the industry comes to fruition, he expects the company will cut its dividend by 20%-25% sometime this year. He says the announcement gives him added resolve that things are going to get significantly worse before they get better for KEY and the banking industry.

He cuts 18 price target to 15, about 88% of tangible book value and 15 times his revised $1.00 2008 EPS estimate. He maintains an underperform opinion on the stock.

CITIGROUP UPGRADES WEBMD HEALTH TO BUY FROM HOLD

Citigroup analyst Mark Mahaney says the 32% year-to-date correction in WebMD (WBMD) shares provides a very good entry point. He believes with 7%-8% penetration for overall U.S. Internet advertising and less than 4% of Pharma's $14 billion-plus U.S. promotional ad spend currently online; notes if Pharma's online ad penetration matched his forecasted overall level of 10.5% by 2010, it would imply 35% segment compounded annual growth rate (CAGR).

Mahaney says WBMD remains a leading online source for both consumers and doctors. He has a strong outlook for growth acceleration and margin expansion. He notes pending acquisition of CNET by CBS (at 18 times EBITDA) highlights scarcity value.

He raises 33 price target to 35 based on 14 times 2009 EBITDA, providing 25% upside. He sees $0.57 2008 EPS.


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