Story updated at 10:05 a.m. to reflect market activity.
Shares of Assured Guaranty were falling -1.2% to $22.93 in morning trading.
The analyst firm reiterated its "buy" rating for the company. The lower price target reflects a higher equity cost of capital due to fears of a Puerto Rico municipal debt default, according to UBA analysts Brian Meredith and Marie Lunackova.
"AGO shares declined 10% over the past two weeks over fears of a Puerto Rico ("PR") municipal debt default after the PR legislature passed "The Recovery Act," which provides a controlled way for PR's public corporations to restructure their debt (previously not legally available)," the analysts wrote. "AGO has $5.3bn of net par exposure ($8.3bn of debt service) to PR, of which $2.6bn is believed to be covered by The Recovery Act. UBS believes there is a high likelihood that the Puerto Rico Electric Power Authority ("PREPA") will seek to restructure its outstanding debt and others are likely to follow."
Separately, TheStreet Ratings team rates ASSURED GUARANTY LTD as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
"We rate ASSURED GUARANTY LTD (AGO) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, compelling growth in net income and good cash flow from operations. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- AGO's very impressive revenue growth greatly exceeded the industry average of 7.8%. Since the same quarter one year prior, revenues leaped by 221.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
- AGO's debt-to-equity ratio is very low at 0.16 and is currently below that of the industry average, implying that there has been very successful management of debt levels.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. In comparison to the other companies in the Insurance industry and the overall market, ASSURED GUARANTY LTD's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Insurance industry. The net income increased by 129.2% when compared to the same quarter one year prior, rising from -$144.00 million to $42.00 million.
- Net operating cash flow has significantly increased by 821.42% to $101.00 million when compared to the same quarter last year. In addition, ASSURED GUARANTY LTD has also vastly surpassed the industry average cash flow growth rate of 4.71%.
- You can view the full analysis from the report here: AGO Ratings Report