Underperform - Price 17.90 on April 8
by FBR Capital Markets

Reducing our rating to Underperform, lowering our target...and reducing our E-earnings due to increasing credit headwinds, expected weakness in commission revenue, and expected margin pressure from lower asset yields...We believe the fixed-income sales and trading will provide some support to revenue, but not enough to offset weakness elsewhere. Our 2009[-E] EPS is lowered from $1.80 to $1.50; our fiscal 2Q09E-EPS goes from 43 cents to 35 cents. Commission trends year-to-date have come in roughly 15% below our previous run-rate estimate, and our new estimate incorporates continued difficult conditions through 2009. We've increased estimated provisions at the bank, given sustained credit headwinds. While current reserves to loans are generally in line with comps [comparative outfits'], the concentration of assets within the Shared National Credit Program implies to us a reserve that will be growing faster than peers'. Our revised outlook for RJF implies a single-digit [return on equity] in '09, hence our below-tangible-book-value price target of 15. Market cap: $2.2 billion.

In the financials I’m keeping an eye on Jefferies (JEF) and Greenhill (GHL), says Guy Adami. And I’m also watching Lazard (LAZ) and Raymond James (RFJ). They pulled back on Tuesday and I think it’s time to dip a toe.

“Raymond James had a better than expected quarter back in January,” says Guy Adami and he’s optimistic that going forward earnings will also hold some upside surprises. “And I like their valuations.”

The stocks, down sharply since September, could fall another 20% as more of the bank's business loans and home mortgages go bad. It holds many risky interest-only mortgages.

RJF is going to take enormous market share in the years to come as rich investors flee the big brokerages that have let them down, and as wirehouse brokers go independent

Adami says Jefferies( JEF), Knight Capital( NITE) and Raymond James(RJF) will be the winners.

“TD Ameritrade (AMTD), Charles Schwab (SCHW) and Raymond James (RJF) all appear to be acting well according to Worth. Not only are they showing relative strength, but they’re trading at or near 52-week highs.”

it has potential

I love Amerprise (AMP) and Raymond James (RJF) says Guy Adami. But they’re not quick trades. These are the kinds of stocks you buy and hold.

From Barron's 7-30-07:

"Magic words at this moment: "Fortunately, unlike some of the larger firms in the securities industry, [we have] virtually no exposure to the subprime business."

They were uttered last week by Thomas James, chairman and CEO of Raymond James Financial (RJF), as the financial- services firm reported record quarterly profits. But even that reassurance and a 20% jump in net income weren't enough to stave off a 3% stock slide...In truth, its subprime-free aura isn't the only appeal. CEO James has been building its banking and asset-management operations, and that shift is "starting to click," notes Wachovia analyst Douglas Sipkin. Bank revenue increased 41% last quarter, and strong deposit growth continues to outpace loan production. Management recently guided up the bank's contribution to 2008 earnings to 19 cents a share from 12 cents, and that figure is projected to reach 35 cents a share in 2009."