(Corrects headline and paragraph one to say the previous price target was $67, not $90, after Punk Ziegel issued a corrected research note) (Adds analyst's comments, share movement, background)
March 11 (Reuters) - Punk Ziegel slashed its price target on Bear Stearns Cos Inc BSC.N stock to $45 from $67, saying the bank has to find a new way of doing business and that it may be forced to go in for a merger.
"The key problem is not the write-offs and losses that the company must take in the just ended first fiscal quarter. The key issue is building a new business model," analyst Richard Bove wrote in a note to clients.
On Monday, shares of Bear fell to a five-year low amid speculation that the bank was facing a cash crunch. Bear later said there was "absolutely no truth" to the rumors.
The stock, which fell as much as 11 percent earlier on Tuesday, pared some of the losses and was trading down 2 percent at $60.89 in afternoon trade on the New York Stock Exchange.
The fifth-largest U.S. investment bank made part of its fortune trading mortgages and other debt over the years, but suffered heavy mortgage-related loss last year.
"This business is now unlikely to show any growth for five years. The profits are also likely to be squeezed out as the more esoteric securities are rejected by the markets," Bove said. "The Bear Funds built around these products are dead."
Bove said the higher borrowing cost, arising from a badly hurt balance sheet and business operations, is likely to weaken the firm's other businesses.
"The next domino to fall will be investment banking," he said, adding unless Bear becomes a full-service player in the sector, it may not be able to bag the big deals.
The analyst also said the U.S. Federal Reserve's move on Tuesday to pump liquidity into the financial system may have been strongly influenced by problems at Bear Stearns.
On Tuesday, the U.S. central bank had said that it was expanding a securities lending program and will accept a broader range of securities as collateral.
Bove, who has a "market perform" rating on the stock, lowered his 2008 earnings view to $2.69 per share from $6.47. For 2009, the new estimate is $4.80 per share, compared with $7.67 projected earlier. (Reporting by Tenzin Pema in Bangalore; Editing by Anil D'Silva)