Compass Point Downgrades First Marblehead (FMD) to Neutral

August 19, 2013 8:01 AM EDT
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Price: $5.05 --0%

Rating Summary:
    0 Buy, 1 Hold, 0 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 1 | Down: 2 | New: 3
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Compass Point downgraded First Marblehead (NYSE: FMD) from Buy to Neutral with a price target of $1.25 (from $2.00) following 4Q13 earnings and a disclosure the expectation of an upcoming Notice of Proposed Adjustment (NOPA) from the IRS that would seek to disallow prior tax refunds and account for additional tax income.

Analyst Michael Tarkan comments, "An adverse final ruling (which would likely take several years to fully resolve) could ultimately lead to an adjustment of $300 million plus interest. While we believe the company's quarterly results demonstrate continued operational progress, and several positive catalysts remain on the horizon, we are unable to fully handicap the audit risk at this point, especially considering the company's current $137 million cash position. As a result, we are moving to the sidelines. We could become more constructive on FMD shares again if the company was able to accelerate its current path to profitability; reach a new partnered lending agreement; move closer to a private student loan securitization; and/or provide more visibility into the audit that demonstrated a clear chance of success."

For an analyst ratings summary and ratings history on First Marblehead click here. For more ratings news on First Marblehead click here.

Shares of First Marblehead closed at $1.00 yesterday.

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