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S&P Downgrades Washington Mutual & iRobot

Washington Mutual (WM) Cut to Sell from Hold (3 star to 2 star)S&P is concerned about Washington Mutual’s exposure to the subprime market; believes the company will need to add more to reserves than expected. Roughly 9% of Washington Mutual’s…

By Douglas A. McIntyre
Published March 15, 2007, 4:44pm ET · 1 min read

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Washington Mutual (WM) Cut to Sell from Hold (3 star to 2 star)
S&P is concerned about Washington Mutual’s exposure to the subprime market; believes the company will need to add more to reserves than expected. Roughly 9% of Washington Mutual’s loans held are subprime, with a large portion having loan-to value ratios over 80%. Roughly 28% of its loan portfolio is comprised of Option Arms it thinks have not yet been stress-tested. It LOWERED 2007 EPS estimate by $0.28 to $3.68; & CUT 12-month target price by $11.00 down to $37.00; that is 10-times 2007 EPS estimate, below historical levels to reflect a difficult mortgage environment.

iRobot (IRBT) Cut to Sell from Hold (3 star to 2 star)
iRobot is likely to face pressure on home robot sales, 60% of the 2006 total, as a housing industry slowdown projected to last into 2008 pinches consumer discretionary spending. It also faces a seasonally slow sales period and high project development costs in first half of 2007. On the bright side, the German military ordered more PackBot bomb-disposal robots on March 7.  S&P is RAISING EPS estimate for 2007 to $0.08 from $0.01, but CUTTING 2008’s to $0.30 from $0.65. Based on S&P price-to-book analysis, it CUT IRBT target price to $11.00 from $18.00.

Jon C. Ogg
March 15, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.

Contact [email protected] for any questions or corrections.

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Douglas A. McIntyre

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.

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