Ladenburg’s Dick Bove slashes ratings on Merrill (MER, SELL), Goldman (GS, SELL), and Morgan (MS, NEUTRAL), citing a weak summer ahead. If we’re not mistaken, Bove was out just a little while ago saying buy ibanks, credit crunch over, but now it’s apparently time to shovel them out the door. Reuters:
The downgrades reflect expectations that brokerage stocks “will do poorly this summer for three reasons… weak earnings, clouded secular outlooks, and the seasonal weakness that seems to impact these issues,” the analyst wrote…The pressures on the brokerage industry have risen because of continued pressure on the economy, lower opportunity for investment banking activity, and risk mismanagement, said Bove.
“In the current quarter, it appears that the brokers have not judged risk appropriately once again,” Bove said, adding that brokers have been shorting the popular financial indexes against real world cash holdings. “The hedge is not working.”
The analyst forecast a 2008 loss for Merrill, and slashed his earnings estimates for Goldman, Lehman and Morgan Stanley