Cowen Gets Buy Calls

Boutique investment bank Cowen (COWN Quote) got a modest boost Tuesday after two Wall Street firms started coverage with buy ratings.

Merrill Lynch research analyst Guy Moszkowski started coverage of Cowen with a buy rating, setting a price target of $18 a share. Sandler O'Neill also initiated coverage with a buy rating on the stock.

Shares of Cowen rose 13 cents to $14.32. The stock has lost 10% of its value since its initial public offering last month. Cowen priced shares at $16 apiece after setting an expected range of $19 to $21 a share.

"Market conditions have driven shares lower from an already low IPO price ... and Cowen is trading at a significant discount to [its] competitors," Moszkowski said in the report. "This has provided an attractive entry point, in our view."

Cowen's shares are trading at a discount to its competitors, according to Moszkowski's estimates. At Tuesday's price, Cowen shares fetch 12 times next year's estimated earnings. Piper Jaffrey(PJC Quote) trades at 17.8 times earnings, and Thomas Weisel(TWPG Quote) is at 12.9 times.

But Cowen makes about 50% of its revenue from investment banking services and the other half mostly from sales and trading. The bank mainly advises deals and assists trading in equities, which doesn't bode well if the stock market slows.