Friday, FBR Capital Markets upgraded CapitalSource Inc. (CSE) shares to Outperform from Market Perform and increased its price target to $5 from $3. The brokerage widened its 2009 loss per share estimate to $1.64 from $0.60, and its 2010 loss estimate to $0.42 from $0.02.
Analyst Scott Valentin believes that current valuations, 69% of his stressed scenario fiscal 2010 TBV, provide an attractive risk-reward for investors. The analyst is not expecting credit to improve in the next several quarters, given his belief that he is in the early stages of an arduous credit cycle.
However, the analyst's upgrade reflects his belief that CSE's capital levels, even under stressed scenarios, are sufficient. Yesterday's sell-off, down 10.6%, vs the S&P 500 off less than 1%, in response to weak credit metrics appears exaggerated and presents an attractive window of opportunity for investors, in the analyst's opinion.
The analyst cautions that investors need to be prepared to accept increasing losses over the next several quarters and lack of profitability until fiscal 2011. The biggest risk to the analyst's recommendation is that the current credit cycle is protracted and losses accelerate at a faster pace than expected.
In the analyst's view, management did a good job of allaying investor concerns with regard to liquidity risk from draws on unfunded commitments and the extension of debt maturities with creditors.
Currently, CSE is up $0.15 or 4.04% and trading at $3.86.
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June 12, 2026 17:14 ET Major central bank action was the focus this week in economic news. The European Central Bank became the first major central bank to move in response to the rising inflationary pressures in the backdrop of the conflict in the Middle East. In North America, the U.S. inflation and trade data as well as Canada’s central bank decision gained attention. The Chinese trade data was the main news in Asia.