Merrill Gets Positive Feedback from Analysts Following Recent Deals

7/29 - "Oppenheimer's Meredith Whitney notes this would reduce MER's CDOs exposure by $11.1 billion. While MER has significantly diluted existing shareholders, they applaud this purging of assets as an attempt to cut its losses and focus on stabilizing its platform and righting the franchise towards growth. While MER's stock still sells at a premium to book value and is expensive in firm's opinion, they believe the stock is getting closer to fairly valued levels as now the hardest work is behind the company."

"Deutsche Bank notes the move increases shares outstanding by est. 38% and reduces est. run-rate EPS from $4/sh. to $2.80/sh but also eliminates most of the worst vintage CDOs, gets cash up front from monolines (vs. waiting 20-40 yrs.), and keeps book value around $22/share. DB is lowering their price target from $31 to $28 but keeping their Hold rating given an inexpensive valuation...They apply a target multiple of 1.2x to their 2009E book value of $23."

"Citigroup says that in their view the Merrill franchise has a tremendous amount of earnings power that can be unleashed over time through execution. While the real promise of the new management team at Merrill is the potential to unlock this earnings power, the legacy assets proved to be a year-long detour, but that is now behind us...Reiterates Buy and $45 tgt (down from $65 due to dilution) as they expect the sale of highly illiquid mortgage related assets to be a catalyst to refocus on the earnings power of the Merrillfranchise. The overhang that has plagued MER for over a year has finally been removed. Furthermore, the capital raised enhances the quality of Merrill's equity base by significantly reducing the preferred component in exchange for straight common equity."