As Enron Corp.’s stock continued on a downward spiral yesterday in the wake of President and CEO Jeff Skilling’s announced resignation late Tuesday, Wall Street analysts moved quickly to reduce their long-term price targets for the energy giant’s stock and downgrade their ratings (see Daily GPI, Aug. 15).

Amid these reactions, analyst Curt Launer of Credit Suisse First Boston in New York City urged cooler heads to prevail. The slide in Enron’s stock following the open bell Wednesday was a “short-term thing based on rumor and speculation and outright fear that there is something more to this than meets the eye,” he told NGI. He projected that Enron stock, which had fallen by more than 13% to $37.25 at mid-day, would recover and do so “sharply.” The company’s stock is more than half of what it was last year at this time — $83.75.

Enron’s stock — which was the second most actively traded yesterday — ratcheted up to $39.60 by the close of trading, but still was down by $3.33/share, or 7.7%, over Tuesday’s closing price.

In the meantime, Enron wasn’t the only company being buffeted by the hysteria yesterday, Launer said. The stocks of Duke Energy, Dynegy, El Paso Corp. and Williams were being dragged “down” as a result. At mid-day, Dynegy’s stock was off more than 3% or $1.45 at $42.85. Duke Energy was off 1.52% or $0.57; and El Paso Energy was down 1.33% or $0.62 at $46.10. Reliant Energy stock took a hit also, falling 1.46% or $0.45 at 30.40. A few of the stocks rebounded to finish out the day ahead — El Paso, Duke Energy and Williams — partly in response to the news of a record low net storage injection for August of 3 Bcf/d.

The reaction to Skilling’s resignation “has spun out of control on unsubstantiated rumors,” Launer noted, adding that “people are overcomplicating the story.” He noted “fraud and trading losses” were being cited as the reasons for Skilling’s departure, “none of which are true.” Skilling said he was leaving Enron for “personal reasons.”

“If there had been anything untoward, there would have been some disclosure of that” in a quarterly 10Q report that Enron filed with the Securities and Exchange Commission (SEC) this week. Launer, who reviewed the report, said “I didn’t find anything out of the ordinary.” But “that’s not to say there haven’t been any problems at Enron,” he noted, citing the continuing problems with the company’s massive power plant in India, as well as in the California electricity market.

“A lot of us feel bad” about Skilling’s decision to resign from Enron because he was the “architect” of many of the company’s accomplishments in the trading arena, Launer said. But he noted Enron is solid and has many talented people, so “business will continue on” after Skilling.

Merrill Lynch analyst Donato Eassey yesterday reduced his intermediate-term rating for Enron stock to “neutral” from “buy,” and his long-term rating to “accumulate” from “buy” in the wake of Tuesday’s disclosure.

Enron “could very well trade down closer to its peers at 16.6 times [its earnings] versus its current 20 times-plus for 2001 and 2002 as this ‘new’ uncertainty brings into question its sustainable growth outlook,” Eassey said in a Merrill Lynch “Bulletin.”

The analyst took this position even though Enron Chairman Ken Lay plans to re-assume his role as CEO of the company. “While we have a great deal of faith in Mr. Lay’s ability to return [Enron] to its [preeminent] position, we are moving to the sidelines for the intermediate-term because we believe the premium price/earnings [ratio] is not likely to hold up during that time,” he wrote.

“Longer term…we have a great deal of confidence in Mr. Ken Lay as he was the original architect of [Enron’s] — and for that matter the entire industry’s — tremendous transformation for the past decade. But we believe this new event will take some time to shake out, and for a catalyst to take shape,” Eassey said.

Although Enron’s “wholesale business is doing just fine, it is the noise surrounding its other investments that will once again test Mr. Lay’s ability to right the ship.”

UBS Warburg analyst Ronald Barone on Wednesday rated Enron stock as a “strong buy” at the current level — no higher than $39/share — while he reduced his 18-month target price for the company’s stock to $60/share from $70. This projection seems to reflect a lack of confidence on Barone’s part that Enron’s stock will rebound significantly in the short term, although he believes the stock price “could be approaching a bottom.”

“Regardless of the reasons [for Skilling’s decision to leave Enron], the reality is Enron has lost substantial employee talent over the past 12 months. In addition, despite continued solid earnings growth from the ongoing expansion of its dominant position in the worldwide energy markets, the company has been plagued with a series of negative issues while its overall quality of earnings has deteriorated, its level of behind-the-scenes financial engineering has increased, and its overall standing with the Street has plunged,” Barone wrote in a “Research Note.”

“Mr. Skilling was a core force in the evolution of Enron (and open markets) over the past decade and the recent turn of events cannot all be placed on his watch. We wish him well and hope he enjoys the time and money he has worked hard to create,” he noted.

Skilling, who had taken over as CEO from Lay earlier this year, had long been groomed for the post. He served as chief operating officer for four years before becoming CEO. Skilling, noted for his drive and some brilliant initiatives, was credited with changing the company’s strategy from one tied to energy delivery and marketing to one focused on diverse e-commerce ventures involving multiple commodities and risk-management activities.

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