Citigroup Downgrades Comerica Inc. to “Sell” on Valuation (CMA)
Early on Friday, analysts at Citigroup downgraded financial services company Comerica Incorporated (CMA) due to its current valuation and interest rate exposure.
The analysts downgraded CMA from “Neutral” to “Sell” with a new price target of $28, down from the previous target of $31. This new valuation suggests about a 21% downside to Thursday’s closing price of $35.32.
A Citigroup analyst commented, “We view CMA as an above average bank but, at its current valuation, a bad stock. … Importantly, since the vast majority of CMA’s loans price off of the very short-end of the yield curve, CMA really needs short rates to move up in order for its earnings to materially move up. … CMA is pricing in a ’14 NIM ~28 bps and ~40 bps above our estimate and the consensus estimate, respectively. In order for that to happen, our model suggests that LIBOR in ’14 would have to average ~110 bps versus its current ~29 bps and the implied forward rate of ~48 bps. That scenario would likely require at least a few near-term Fed rate hikes. As such, our sense is that the marginal buyer of CMA at its current valuation will be disappointed.”
Comerica shares were down slightly during morning trading on Friday. The stock is up about +19% over the past year.
The Bottom Line
Shares of Comerica (CMA) have a dividend yield of 1.93% based on last night’s closing price of $35.32 and the company’s annualized dividend payout of 68 cents per share.
Comerica Incorporated (CMA) is not recommended at this time, holding a Dividend.com DARS™ Rating of 3.3 out of 5 stars.
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