February 8, 2008 / 7:55 AM / 11 years ago

UPDATE 1-RESEARCH ALERT-Punk's Bove ups Lehman target, shr view

(Adds details, analyst’s comments, background)

Feb 8 (Reuters) - Punk Ziegel analyst Richard Bove raised his price target and 2008 and 2009 earnings estimates on Lehman Brothers Holdings Inc LEH.N, saying he sees the company benefitting from a major mortgage refinance boom in 2008.

Bove said it has already begun and this increased activity in mortgage refinancing is due to a decline in interest rates. Mortgage rates are lower now, making economic sense to refinance, he said.

Bove, who finds Lehman’s stock very attractive and rates it “buy,” raised his price target on the company to $71 from $61. He upped his 2008 earnings-per-share estimate to $6.50 from $6.47, and 2009 estimate to $7.20 from $6.44.

If the stimulus package in front of Congress is passed with a provision that the government-sponsored enterprises, like Freddie Mac FRE.N and Fannie Mae FNM.N, be allowed to buy mortgages in excess of $700,000, the doors will open very wide to more mortgage activity, Bove wrote in a research note.

Lehman has already demonstrated that it is a leader in the mortgage industry and its closing of certain vertically integrated operations will benefit not harm this position, Bove said.

On Wednesday, Lehman said it is likely to write-down roughly the same amount of assets in the first quarter as it did in the third and fourth quarters of 2007. The company added that it has reduced its leverage loan commitments to just $4 billion from $10 billion at the end of November, 2007.

Shares of the company closed up about 4 percent at $60.48 Thursday on the New York Stock Exchange. (Reporting by Nivedita Gupta in Bangalore; Editing by Bernard Orr)

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