Legg Mason (LM): Valuation Low For a Reason

FBR has chopped Legg Mason’s (LM) target $9, to $49, on a higher-than-expected SIV write-down within the quarter. Even the new target is $5 over the current stock price:

[W]e believe the company’s latest round of capital support arrangements for its underlying funds represents further delay in an upside catalyst for the stock. Although valuation appears compelling based on the 29% discount that the stock trades relative to its peer group on a CY 2009 earnings basis, we believe that shares will struggle to find support until underlying products start showing performance and sales traction and until certainty is gained on the magnitude of ultimate capital support, all of which likely rule out support for the stock via buybacks.

FBR reiterates MARKET PERFORM, target price cut from $58 to $49.

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