Washington Mutual (WM) Cut to Sell from Hold (3 star to 2 star)
S&P is concerned about Washington Mutual’s exposure to the subprime market; believes the company will need to add more to reserves than expected. Roughly 9% of Washington Mutual’s loans held are subprime, with a large portion having loan-to value ratios over 80%. Roughly 28% of its loan portfolio is comprised of Option Arms it thinks have not yet been stress-tested. It LOWERED 2007 EPS estimate by $0.28 to $3.68; & CUT 12-month target price by $11.00 down to $37.00; that is 10-times 2007 EPS estimate, below historical levels to reflect a difficult mortgage environment.
iRobot (IRBT) Cut to Sell from Hold (3 star to 2 star)
iRobot is likely to face pressure on home robot sales, 60% of the 2006 total, as a housing industry slowdown projected to last into 2008 pinches consumer discretionary spending. It also faces a seasonally slow sales period and high project development costs in first half of 2007. On the bright side, the German military ordered more PackBot bomb-disposal robots on March 7. S&P is RAISING EPS estimate for 2007 to $0.08 from $0.01, but CUTTING 2008’s to $0.30 from $0.65. Based on S&P price-to-book analysis, it CUT IRBT target price to $11.00 from $18.00.
Jon C. Ogg
March 15, 2007
Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.
Top Gaining Stocks
Top Losing Stocks