Indymac Sinks on Analyst Downgrade

May 27, 2008 No Comments »


Depleted shares of Indymac took another hit Tuesday after UBS analyst Eric Wasserstrom slashed his price target on the flagging mortgage lender and warned that the company would need to raise capital.

Wasserstrom cut Indymac’s price target to $2.25 from $5 a share, noting that the company likely won’t return to profitability anytime soon amid the ongoing mortgage crisis.

Additionally, he now expects Indymac to post a loss of $4.65 per share this year, up from $1.50 per share, and anticipates a 2009 loss of 95 cents, compared to a previous earnings estimate of 50 cents per share.

With the company’s stock price in the gutter, he speculated that Indymac will likely need to raise funds by selling assets or via a strategic investment, not through its previously successful Direct Stock Purchase Plan.

Instead, Wasserstrom argued that Indymac may need to part ways with its profitable reverse mortgage unit Freedom Financial as delinquencies continue to rise and production remains soft.

However, Indymac has argued that its capital position remains strong, with roughly $4 billion in operating liquidity as of the end of the first quarter, unchanged from a year ago when production was three-fold.

The company said it raised $670 million in new capital in 2007 and $84 million via its Direct Stock Purchase Plan since late February.

Shares of Indymac fell 13 cents, or 6.51%, to $1.87 in early afternoon trading on Wall Street, hovering near an all-time low.

(photo: mezuni)

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