Compass Point Upgrades First Marblehead (FMD) to Buy as IRS Withdraws Refund Challenge

Compass Point upgraded First Marblehead (NYSE: FMD) from Neutral to Buy with a price target of $7.00 (from $2.50).

Analyst Michael Tarkan said, "We are upgrading FMD to Buy, from Neutral, and raising our price target to $7.00, from $2.50, after the company announced that the IRS is no longer challenging the company's previously received federal tax refunds. The IRS case has been a substantial overhang on FMD shares as the size of the potential liability ($300M+) was well in excess of the company's cash position and market cap. Now, assuming the IRS withdrawal gets approved, we expect investors to gradually re-focus on the company's operations and existing capital position. While we continue to believe management needs to get more aggressive on expenses, and we do not expect profitability to return until sometime in FY16 (at the earliest), fundamentals continue to slowly improve and we see value within the existing franchise that could be attractive to a potential acquirer."

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 $4.85 yesterday.

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