2008 Dec 10-Upgrade/Downgrade

1. American Express(AXP) was downgraded by BAC to sell, target $13
   
   Via Reuters:

   Citigroup and Bank of America initiated coverage of American Express Co (AXP) with "sell" ratings, partly due to a slowdown in consumer and corporate spending.
   
   Significant consumer and corporate spending slowdown, the accelerated loan book growth over the past few years and geographic and demographic risks embedded in current receivables will hurt the company's near-term prospects, Bank of America said.
   
   Upcoming funding and liquidity obligations needing to be addressed in a stressed capital markets environment will also negatively impact the prospects, it added.
   
   Citigroup said credit will deteriorate at a faster rate at American Express than at its peers due to its more aggressive growth in 2006-2007.
   
   Citigroup also started coverage of the credit card sector with a cautious view and said the group faces negative headwinds from weakening credit, a difficult funding environment and the potential for greater regulatory pressure.
   
   "The powerful combination of rising unemployment and weak housing should drive charge-offs above historical peak levels," Citigroup analyst Donald Fandetti said in a note dated Dec. 9.
   
   Also, weak fourth-quarter results and new restrictive industry rules by the U.S. Federal Reserve coming as early as Thursday next week will be the key negative catalysts in the short-term, Fandetti wrote.
   
   The brokerage started Capital One Financial Corp (COF) with a "hold" rating, saying the company has the best relative funding position.
   
   It also initiated Discover Financial Services Inc (DFS) with "hold."
   
   Shares of American Express were down 8 percent at $21.37, while those of Capital One were down 3 percent at $31.86.
   
   Discover Financial shares were down 2 percent at $10.12 Wednesday morning on the New York Stock Exchange.



2. Citigroup downgrades Sina(SINA), target $30
   
   Via Barron's:

   Citigroup’s Jason Brueschke today cut his rating on Sina (SINA) to Hold from Buy, slicing his target on the stock to $30, from $40, to bring his stance in line with “our broader negative 2009 sector outlook for the advertising market.”
   
   “Failing corporate profitability and consumer sentiment, not simply headline GDP growth, are keys to advertising spend in 2009,” he writes. Brueschke says Q4 will likely be strong for the China-based Web portal, but that the first half of 2009, and especially Q1, will be a challenge, with advertisers delaying commitments, making shorter commitments, and making smaller commitments, increasing earnings risks.

Related Posts :

The current credit-card business is another version of subprime lending

Sources :

1. Reuters: UPDATE 1-Citi, BofA initiate American Express with sell, December 10, 2008 12:54pm EST
2. Barron's: Sina: Citi Downgrades; Sees Growth Slowdown In ‘09, December 10, 2008, 1:51 pm
   

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