This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Analyst Actually Thinks Kodak's Stock Will Rise Over 400%

Stocks in this article: EK

BOSTON ( TheStreet) -- When news broke Wednesday that Eastman Kodak (EK) is considering filing for bankruptcy protection, Rafferty Capital Markets analyst Mark Kaufman looked a bit foolish with a "buy" rating and $5.50 price target as the shares plunged below 50 cents.

So, on Thursday, Kaufman made it up to those investors who follow his research. He downgraded Kodak to -- wait for it -- "hold" with a $2.75 price target. That implies the stock of a company that may file for Chapter 11 would rally more than five-fold over the next year.

The Wall Street Journal reported Wednesday that Kodak is preparing to seek bankruptcy protection as it continues to find buyers for some of its patent portfolio. If the last-ditch move to sell the patents fails, Kodak is making the preparations for the Chapter 11 filing, which includes asking banks for $1 billion in financing, the Journal reported.

But only a week ago, Kaufman came out with an endorsement for Kodak. He argued that the recent appointment of Laura Quatela to co-president "signals Kodak may be positioning itself for a major corporate restructuring to simultaneously unlock its asset value and provide added liquidity."

It turns out Kaufman was right about a structuring, but wrong in assuming it would be in the corporate offices. In his downgrade note released today, Kaufman argues that "a Chapter 11 bankruptcy would amount to a strategic maneuver, which perverse as it may seem, could actually preserve more value for all of Kodak's investment constituents including the equity than other options it is likely considering."

Kaufman's logic is that a Chapter 11 filing would allow Kodak to borrow more than the $600 million the company is currently allowed under debt indentures. He also argues that the $1 billion credit line from banks that the Journal reported would be more than ample liquidity for Kodak to survive 2012.

Still, Kaufman cut his rating on Kodak to "hold" and sliced his price target in half because of "the heightened uncertainty about the actual timing and manner of a digital patent portfolio transaction and/or other liquidity events." In doing so, Kaufman still argues that Kodak's asset values "are not likely to be impaired by a strategic Chapter 11 bankruptcy reorganization." In this case, it's all about the headline risk.

Kaufman isn't the only analyst with a "hold" rating on Kodak. Argus Research and Brean Murray also recommend holding on to shares of the company. The difference, though, is that those firms last made the "hold" call in November. Four other research shops covering Kodak all have "sell" ratings, including Citigroup and Deutsche Bank, which haven't updated investors on the company since early November.

It doesn't take a research analyst's call to get the real sentiment on Eastman Kodak, though. As one person tweeted yesterday in separate posts, "$EK filing Chapter 11 - this didn't happen 10 years ago???? Why were we not all short this stock a year ago? Just say it, dumb, lazy, what?"

That doesn't sound good for the prospects of a stock that rallies 500% in a year. And by the way, shares of Kodak are down another 12% today to 41 cents.

-- Written by Robert Holmes in Boston.



>To contact the writer of this article, click here: Robert Holmes.

>To follow Robert Holmes on Twitter, go to http://twitter.com/RobTheStreet.

>To submit a news tip, send an email to: tips@thestreet.com.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,672.60 -141.38 -0.79%
S&P 500 2,051.82 -11.33 -0.55%
NASDAQ 4,757.8790 +7.4820 0.16%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs