BOSTON (AP) -- Shares of BGC Partners Inc. surged on Monday after a Raymond James analyst upgraded the financial brokerage, saying a sharp decline in the stock price this month may not be fully warranted.
THE SPARK: Analyst Patrick O'Shaughnessy lifted his rating of BGC Partners to "Strong Buy" from "Outperform," noting that shares of the New York-based company closed on Friday at 29 percent below their Oct. 31 closing price.
THE BIG PICTURE: BGC is a global brokerage primarily serving the wholesale financial and real estate markets. Several factors have contributed to a recent decline in the stock, including the company's Nov. 2 announcement that it would reduce its regular quarterly cash dividend to 12 cents per share from 17 cents. President Barack Obama's re-election on Nov. 6 ensured that the Dodd-Frank financial overhaul law would not be repealed, leading to more strict financial regulations that could hurt brokerages such as BGC. Damages from Superstorm Sandy created operational problems for BGC and other brokerages on the East Coast, and Moody's Investors Service withdrew its credit ratings on BGC on Nov. 8.
THE ANALYSIS: O'Shaughnessy said in a note to clients that BGC's fourth-quarter results "may be weak" due to concerns ranging from the so-called "fiscal cliff" negotiations in Congress to storm-related issues. But he sees "no permanent impairment to BGC's business model, nor do we expect the firm to have difficulty paying its dividend."
As to the news this month affecting BGC's stock, O'Shaughnessy said that "none of these items should have been unexpected, nor do they change our outlook for BGC's earnings."
SHARE ACTION: BGC shares rose 50 cents, or 15 percent, to $3.83 in midday trading. The stock hit a 52-week low of $3.11 on Friday and traded as high as $8.04 in March.