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March 27 (Reuters) - Punk Ziegel analyst Richard Bove more than halved his 2008 earnings forecast for Merrill Lynch & Co Inc MER.N estimating the U.S. bank's next write-down at $6.79 billion.
"Estimating the earnings of Merrill Lynch has become a game of estimating what the next write-down will be," Bove said, adding that the various indices that are being used to help Merrill adjust its values are as "fallacious as ever but they are still being used."
These indices, such as the ABX and CMBX which track subprime-mortgage securities and commercial-mortgage-backed securities, kept falling in the first two weeks of March, Bove said.
"The next shoes to drop in this company are likely to be the announcements of a dramatic cost cutting program, severance pay; and just possibly the reduction of the dividend," Bove wrote.
Investors need to wait for the down cycle to end before making money in this stock, said Bove, who has a "market perform" rating on the stock.
He more than halved his 2008 earnings view for Merrill to $1.37 a share from $3.72 a share. Bove also lowered his price target on the stock to $48.50 from $54.50.
In January, Merrill had reported about $16 billion in mortgage-related write-downs and adjustments for the fourth quarter -- the worst quarter of the company's history.
Merrill shares closed down 7.17 percent at $44.42 Wednesday on the New York Stock Exchange. (Reporting by Tenzin Pema in Bangalore; Editing by Himani Sarkar)