Meredith Whitney Slams Wachovia: Actionable Short Opportunity

by: Notable Calls posted on: July 15, 2008 | about stocks: WB    

Oppenheimer's Meredith Whitney is out downgrading Wachovia (WB) to Underperform noting that as more news about WB comes out, they are increasingly convinced that the outlook is bleak for equity shareholders. WB has said that it's in the process of "enhancing the capital efficiency of the balance sheet" and "reducing mortgage exposure."

The firm estimates its mortgage portfolio will decline by 9% sequentially and total on-balance sheet loans will decline by at least 5% by year-end. The problem is the "denominator effect"; the loss numerator grows while the asset denominator declines, resulting in spiking loss ratios, lower assets, and lower net interest income, at least 50% of its earnings. In this very real scenario, expenses simply can not come down fast enough, seriously jeopardizing WB's ability to grow earnings.

Notablecalls: Looks like Meredith has given WB stock the proverbial kiss of death. I expect the stock to be down to the tune of 15% to 20% today (or possibly more). Anything above $8.50-$9 level is an Actionable Shorting opportunity this AM.

This article has 7 comments! Add yours below...
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This article has 7 comments:

  •  
    Ames
    Tiedeman
    Jul 15 07:59 AM
    My Website
    Looks like this one will be gone. I am amazed at how far and fast these names have fallen.
  •  
    valueinvesto
    r123
    Jul 15 12:21 PM
    To Bear Stocks: Everyone has made money shorting financials this year. Nothing too spectacular about that call.
  •  
    User 127919
    Jul 15 02:04 PM
    go ahead girl tell it as it is. bravo
  •  
    Ames
    Tiedeman
    Jul 16 07:03 AM
    My Website
    This is one analyst who has been dead on. She has also suggested, to no surprise to many, that BAC will be cutting their dividend. Her calls on C have been correct too.
  •  
    thedomfc
    Jul 17 10:39 PM
    Oops!
  •  
    Ames
    Tiedeman
    Jul 19 01:30 PM
    My Website
    BAC and C did not cut yet. I suspect they will unless their earning turn up by Q4.
  •  
    Daniel
    Jacome
    Jul 20 12:23 AM
    My Website
    WFC for WB making the rounds
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