Is LEH stock oversold?

Question

The company already warned loss in the coming quarter and all the news and etc making it's stock price plunge more than 50% in less than 5 days. I think the loss should be priced in shouldn't this stock be a buy now for short term trade until earning date?

Answer 1

Anytime someone thinks about a stock, "it has been hit so hard, it can't possibly go any lower" they get killed.  You're trying to think rationally in a market for LEH that is in a great deal of panic.  And right now panic is winning over greed.  Like people thinking, "wow, LEH could go to close to 0, like Bear Stearns did, I've taken a real beating, but maybe I should sell out now and just eat it rather than continue to lose even more."  Sometimes figuring out what a stock's fundamentals say it should do is worthless, and figuring out what the freaked out people are going to do is best.

Answer 2

I would stay far away from financials if I were you. The only one I would touch would be GS.

Answer 3

It is oversold right now but be careful there.  This market, and sector especially, is running on fear.  BSC was oversold on a technical basis but continued to move lower.  The problem is that this company is one announcement away from $10 or less.  Since there is no down tick rule anymore the shorts could eat this one alive even if there is no additional news out.  I think you will be a hero or a zero if you buy at these levels, but predicting the future is impossible.  If you are considering buying options the premium is probably very high right now, but you can get all the potential up side and reduce your potential losses.

Answer 4

It may be oversold but if we look at historical leverage of brokers and investment banks in previous recessions we see that there could be a further downside to all the firms right now.

I agree with the above comment about staying away except I would also include GS. We're sideways, so there'll be a chance later on when we're more stable to still pick up a bargin in the financials.

Answer 5

I don't think the dust has yet settled around LEH. The turmoil continues today with the management shuffle. While the group is trading higher today, LEH is still down. Even with the earnings "pre-announcement" it is not clear what is left to unravel here. Until a clearer picture is available, LEH is more likely to trade lower than higher. I can't see any significant trading bounce in the very near term. But, differing opinions are what make the markets function, so good luck with whatever you decide to do.