Goldman Sachs Puts Jefferies Group (JEF) On Conviction Sell List

Goldman Sachs Group analysts Richard Ramsden, Brian Foran, Daniel Harris and Jessica Binder Graham added Jefferies Group Inc (NYSE: JEF) to its Conviction Sell List, with a price target of $22 per share.

The analysts said that their estimates and price target showed there was currently a 5% downside to Jefferies Group Inc shares.

They said that less favorable conditions in the core businesses of Jefferies Group Inc were partly to blame.

The Goldman Sachs Group analysts wrote, "in March and April, BB credit spreads narrowed to the lowest point (220 bp over 10-year Treasuries) since mid-2007, helping to fuel record US high-yield issuance. However, credit spreads have widened significantly in recent weeks (up 50% QTD), which has dampened high-yield issuance in May to the lowest point in over a year. We expect less favorable credit market conditions to persist and create a headwind for JEF given fixed income sales and trading (FICC) and debt issuance accounted for nearly two thirds of net revenue in 2009. Moreover, the equity underwriting backlog could decline with any prolonged period of market volatility/decline, and JEF has generated 5% of revenue over the past year from ECM issues."