UPDATE 1-Ladenburg's Bove cuts Lehman price target

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May 21 (Reuters) - Ladenburg Thalmann analyst Richard Bove cut his price target as well as 2008 and 2009 earnings estimates for Lehman Brothers LEH.N, saying the investment bank faces a tough market and the stock is relatively high risk.

Bove, who slashed the price target to $38 per share from $48 per share, said the company's hedges which worked so well to blunt the impact of markdowns in the first quarter may not be working so well now.

The analyst said the markdowns on securities are not as severe in this quarter as they were in the past two.

"However, the offsetting hedges may not have worked and if this proves to be the case, Lehman could actually lose money in its second fiscal quarter," Bove added.

Bove cut his 2008 earnings estimate to $2.36 per share from $3.87, and 2009 earnings estimate to $3.48 per share from $4.64.

He, however, kept his "neutral" rating on the stock.

Lehman will find it difficult to develop new business and most of the businesses that it serves fell back in April and May, said Bove. "Its investment banking pipeline is down by 15 percent, for example," he added. Bove said he believes the investment bank may have to bear high severance costs as it has begun laying off employees.

Lehman shares closed at $42 Tuesday on the New York Stock Exchange. (Reporting by Bhaswati Mukhopadhyay in Bangalore; Editing by Jarshad Kakkrakandy)