Credit Suisse has changed its tune on the sluggish Legg Mason (LM). LM has been dreadful this past year, down roughly 50% from its 52-week high, rightly earning Credit Suisse’s dismay. However, recent M&A murmurs have altered CS’s outlook:
…M&A discussion could become a positive catalyst for the stock. As we do not expect Legg Mason to be acquired over the next six months, we do believe the company may start to consider strategic investors (Chinese Insurance Companies, Asian Sovereign Wealth Funds, and European Financial Institutions) which could provide distribution leverage, and also prevent the LM stock from underperforming despite a high level of AuM outflows.
Yet, if there is a sale, Credit Suisse sees LM fetching a 20% premium. Still, they make sure we understand the company’s still a dud:
Our fundamental value for the LM stock has not improved, as we continue to expect a high level of outflows, and also believe there will be additional SIV / ABCP impairment charges on the horizon (cash and non-cash).
Legg Mason (LM) upgraded from Underperform to NEUTRAL (target price $58).
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