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Analysts' opinions on stocks in the news Friday
From Standard & Poor's Equity ResearchS&P REDUCES RECOMMENDATION ON SHARES FREDDIE MAC TO STRONG SELL FROM SELL (FRE; 4.38):
Our downgrade reflects our opinion that current risks are not appropriately reflected. Despite shares trading at a deep discount to historical average, we believe the viability of the common shareholders' interest may be in jeopardy. While we expect FRE to continue to play an important role in the housing market, we are deeply concerned by uncertainties surrounding FRE's capital, which is negative $16.9 billion on a fair-value basis, when assets are marked to market. We are reducing our target price to 2 from 6, roughly 0.6 times book value and well below historical average. -K. Cole-CFA
S&P REDUCES RECOMMENDATION ON SHARES OF FANNIE MAE TO STRONG SELL FROM HOLD (FNM; 7.71):
Our downgrade reflects our opinion that current risks are not adequately reflected. Despite shares trading at a deep discount to historical average, we believe the viability of the common shareholders' interest may be in jeopardy. While we expect FNM to continue to play an important role in the housing market, we are deeply concerned by uncertainties surrounding FNM's capital, which is negative $2.1 billion on a fair-value basis when assets are marked to market. We are reducing our target price to 4 from 15, roughly 0.2 times book value and well below historical average. -K. Cole-CFA
S&P KEEPS HOLD RECOMMENDATION ON SHARES OF LEHMAN BROTHERS (LEH; 14.55):
According to an SEC filing, LEH's Tier 1 capital ratio was 10.7% and its total risk-based capital ratio was 16.1% at the end of May. We view these levels as well in excess of regulatory requirements, and note that they were subsequently strengthened by a June capital raise. We also note that Level 3 assets declined in absolute terms over fiscal year 2007 (November), but rose somewhat on a percentage basis, as expected. We expect continued headline risk to weigh on its share price, and we are trimming our target price by 7 to 20, a discount to book value. -M. Albrecht
S&P REITERATES BUY OPINION ON SHARES OF APPLE INC. (AAPL; 174.85):
Apple launches the 3G iPhone today, and following checks of local retailers and reading news of long-lines at various stores throughout the world, we take favorable note of the attention that the launch has already generated. Considering the iPhone's new features, faster service, lower pricing, and larger international exposure, we not only anticipate increasing unit handset sales as the rollout proceeds, but also think that the iPhone can promote brand awareness, helping sales of AAPL's other products. We reiterate our 12-month target price of 210, based on p-e analysis. -T. Smith-CFA, C. Montevirgen
S&P RAISES OPINION ON INFOSYS TECHNOLOGIES ADSS TO BUY FROM HOLD, ON VALUATION (INFY; 40.19):
The ADSs are down 8% this morning, in our opinion reflecting investor concerns about the possibility of decreased spending on IT services. But June-quarter earnings per ADS of $0.54, vs. $0.46, are $0.02 ahead of our estimate. For full fiscal year 2009 (March), we are lowering our revenue growth projection modestly to 20%. And we think operating margins will be flat this year, as a weaker rupee and cost controls are offset by rising wages and other employee-related expenses. However, we are keeping our fiscal year 2009 earnings per ADS forecast of $2.32, and reiterating our 12-month target price of 50. -D. Cathers