Ambac's (ABK) core 4Q07 operating results were a negative $6.39 per share. The reported net loss was $3.3 billion or a negative $31.85 per share, due to significant writedowns of $5.2 billion on its credit derivatives portfolio. The inability to attract new business (due to rating downgrades), suspension of capital raising program, dividend reduction, increased loan loss provision and resignation of the CEO weigh heavily on the company.
We consider it highly possible that ratings will be downgraded further (per S&P {MHP} and Moody's {MCO}) as the housing market cycle has yet to trough and the strong potential for additional writedown remains. Considering the current economic environment, we anticipate revenue and EPS results would remain under pressure.
We also view future dividend payment as being less secure. Therefore, we are maintaining a Sell rating on the shares with a six-month target price of $7.65.
Read the full analyst report on ABK.
Read the full analyst report on MHP.
Read the full analyst report on MCO.
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