Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Credit Suisse Lowers the Boom on AIG


But stockholders may soon be feeling even more pain.

American International Group (AIG) has seen better days. This past Friday, Fitch Ratings said it "may cut its ratings [on the firm]... citing uncertainty over the outcome of AIG's review of its businesses" - and its CEO is expected to announce plans in late September to make the company more competitive by divesting it of some of its parts.

And on Monday, Tom Gallagher, an analyst with Credit Suisse (CS), "lowered his third-quarter earnings estimate to a loss of $0.86 per share from a profit of $0.13 per share." He also reportedly lopped his price target from $30 to $22.

Why? Because of the higher perceived risk associated with ratings uncertainty.

Unsurprisingly, the stock got slammed on the news, closing down more than 5%. This indicates that Gallagher may not be alone; other analysts may soon follow, and the stock could take further hits.

I'm also a bit put off by how much Gallagher lowered his number. More specifically, he went from a 13-cent gain to a loss of $0.86. That isn't negligible - and I think it shows just how difficult the numbers are to predict. By extension, it also tells me I want to see a couple of quarters of results before I even think about bottom-fishing the shares.

And what do you think tax-loss selling will be like? With the stock currently more than 70% off its 52-week high -- and with all this bad news -- my hunch is that the shares could end up getting pummeled even more.

Finally, I'm concerned that the stock could be extremely volatile until AIG's CEO announces the much-awaited plans to reconfigure the company.

The flip side: AIG remains a big, well-respected name. As a result, I think there's a chance that the stock could, at some point, be a good value.

Stay tuned.

AIG closed at $18.78, down $1.09 or 5.49%.

What are the pro traders saying about your stocks?
Minyanville's Buzz and Banter- 14 day FREE Trial

< Previous
  • 1
Next >
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

Featured Videos