Raymond James’ Downgrades Of Linn Energy, LinnCo
Analyst Kevin Smith at Raymond James previously had Linn Energy LLC (NASDAQ:LINE) rated as a strong buy, but he downgraded it to outperform. He also pushed his price target down a bit, nudging it from $44 per share to $40 per share, although he still likes the company and its stock.
He said they remain confident in the company’s financial health, but they believe that the proposed merger with Berry Petroleum Company (NYSE:BRY) will be pushed out by 30 days or more. According to Smith, even if the deal between the two companies doesn’t close, the companies’ partnership still looks strong.
Both Smith and the analyst team at JPMorgan note that Linn chose to disclose the inquiry even though it was not required to do so. Smith though, adds that an inquiry is not a formal investigation and that the SEC has looked over Linn and LinnCo’s finances “many times” since the questions about the hedging practices of the partnership arose.
Smith says it’s “easier to throw in the towel and stay on the sidelines until the market and the SEC sort all of this out.” That’s essentially what JPMorgan is recommending investors do. Smith though, believes that the inquiry will be over fairly quickly and that it won’t take the SEC long to realize that Linn’s accounting “is in good order.”
I don't think you can second guess the SEC one way or the other on what they are looking at, despite the comments by Cooperman and Raymond James . The risk of an informal investigation is that the company will have to restate its financials. I'm not saying it will happen but just be aware that it's a possible outcome.
Of course they're right, no big mystery there to anyone who can read and think. But if you had that conviction, a $40 price target, merger or not, why would recommend to stay on the sidelines? Why wouldn't you advise buying this hand over fist? Even when they're right analysts are worthless.
Agreed, but I got in too soon. Now I will be forced to average down. Only went in $6K though. But one thing for sure, I have never seen such a strong reaction in any stock due to an "informal" SEC inquiry being announced. Herbalife did, but there was a lot more going on than just the inquiry, compliments of Icahn and Akman.