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Credit Woes Hit Jefferies: Stock Plummets 38%
9 Mar
Summary
- Analyst downgraded Jefferies due to credit and legal risks.
- Lawsuit alleges $126 million in missed payments.
- Stock has plunged 38% year-to-date.
Jefferies' stock has been significantly impacted by mounting credit and legal concerns, leading to a downgrade by JPMorgan analyst Ryan Kenny. He revised his rating to equal weight from overweight and slashed the price target to $49, though this still suggests potential upside.
These issues include a lawsuit from Western Alliance Bank concerning $126 million in alleged missed payments and approximately $134 million in exposure to the failed UK mortgage lender MFS. Despite Jefferies denying any wrongdoing, the market remains cautious about additional credit, legal, and reputational risks.
Shares have dropped 38% year-to-date and 32% over the past twelve months. Kenny noted that while the stock has de-rated significantly, core business activity is improving and Jefferies is expected to gain market share in investment banking. He anticipates revenue and earnings growth as capital markets improve.
