UPDATE 1-RESEARCH ALERT-Lehman cuts Freddie Mac price target
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Aug 8 (Reuters) - Lehman Brothers cut its price target and widened its 2008 loss estimates for Freddie Mac (FRE.N), based on higher expected credit costs for 2008 to 2010.
The brokerage raised its total credit cost estimates for 2008 through 2010 by $7 billion and sees an additional $4 billion of securities impairments.
Freddie Mac on Wednesday posted its fourth consecutive quarterly loss, set plans to slash its common stock dividend and doubled its reserves for losses on delinquent loans and home foreclosures. It affirmed a commitment to raise $5.5 billion in fresh capital.
The brokerage said it appears that with an additional $5.5 billion in capital, Freddie Mac should remain above the minimum capital requirement, implying that could conclude their capital raising provided losses are not meaningfully higher.
The brokerage widened its 2008 loss-per-share estimate to $2.88 from its prior view of $2.20.
Lehman kept its "overweight" rating on stock, saying there is significant potential upside to its new price target of $20. It previously had a target of $45.
Shares of Freddie Mac were flat at $5.89 in morning trade on Nasdaq. (Reporting by Jennifer Robin Raj in Bangalore; Editing by Deepak Kannan)
