Analysts Generally Upbeat About Merrill Outlook


Merrill Lynch on Thursday posted a first quarter loss, after taking several billion dollars of writedowns for subprime mortgages and other risky assets.

The following is reaction from industry analysts and other experts:

"It was my view that management was going to throw everything into this quarter. I would expect this is a clean-the-cupboards kind of report, including anything that John Thain could put into a quarter that was already going to be ugly. But the news from here should get brighter."

"Thain is really smart. As soon as he got his name on the door, he went out to the sovereign wealth funds. He's already raised a chunk of capital. He wanted to raise more, preemptively, than he needed. Now he's addressing the accounting issues."

--Michael Holland of Holland & Co told Reuters

Earnings Recap

“I would argue that these numbers are better than people had expected, and I would argue that it’s showing that the company, in many of its divisions, is actually maintaining a relatively good position.  Now I don’t want to go out and buy the stock, and I’ve got a market perform on it, but I would be very wary about becoming too negative about what you’re seeing in this particular quarter.”

--Richard Bove, Punk, Ziegel & Co told CNBC

"Rumors were floating around that it was anticipated their numbers would not be good. (The shares) are just a little bit to the low side. It came down a little last night in anticipation. But it doesn't' look like anything catastrophic will happen."

--Paul Mendelsohn, Chief Investment Strategist, Windham Financial Services, told Reuters

Merrill Lynch Earnings

“Merrill’s in a tough spot, Citigroup’s in a similar spot, where you have really big exposures to illiquid assets that are getting written down a lot.  I think Merrill Lynch has enough capital to weather this; we’ve got to do some more analysis to make sure they do after today, but the real key is going to be when these marks pass, and that may be next quarter…They’re eventually going to be a very strong earnings company again, just in this environment I’m afraid people might have to wait a while to see those revenues kick back up again.

--Jeffery Harte, Managing Director of Equity Research at Sandler O'Neill, told CNBC

"The expectations for earnings have been dramatically, greatly downgraded. It just strikes me that there is very little scope for shock value. Therefore I don think the market will be going to be very fazed by what's happening in the financial sector."

--Mike Lenhoff, Chief Strategist at Brewin Dolphin, told Reuters

How to Play Merrill's Loss

“We would be a holder of the stock.  We’re a buyer of the stock long-term…Merrill’s down about 50 percent in the last year; that really overly discounts the negatives…They have a new CEO, who’s doing all the right things.  They have a great global franchise, they have a great management team…We believe Merrill’s going to be 40 to 50 percent higher over the next few years.”

--David Katz, Matrix Asset Advisors Chief Investment Officer, told CNBC

For Full Coverage of Merrill's Earnings, click here.