Compass Point Downgrades First Marblehead (FMD) to Neutral

Compass Point downgraded First Marblehead (NYSE: FMD) from Buy to Neutral and maintained a price target of $7.00, noting expenses remain high.

Analyst Michael Tarkan commented, "We are downgrading FMD to Neutral, from Buy, but are maintaining our $7.00 price target after the company reported weaker-than-expected 3Q15 earnings, highlighted by another quarter of elevated expenses and continued cash burn. We are also lowering our FY15 and FY16 operating EPS estimates to ($3.65) and ($2.50), respectively, from ($3.30) and ($2.00) to reflect higher expenses. FMD shares are up 39% since our December 18 upgrade and although we expect the company could receive a higher price in a takeout, expenses remain too high and the Massachusetts tax case remains a meaningful liquidity overhang, in our view. Simply put, the pace of operational improvement remains too slow, and cash levels, which remain sufficient today, continue to move lower. We continue to believe management should entertain strategic alternatives but are moving to the sidelines as we have no indication that management is willing to sell at this point. Our $7.00 price target reflects 1.3x FY15 cash per share."

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 $6.75 yesterday.

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