Deutsche Bank AG (USA) (DB) — This Frankfurt, Germany-headquartered international banking company, which operates in 76 countries, is facing numerous headwinds.
The Volkswagen scandal and legal problems have had a negative impact on the image of Germany’s biggest lender. And management recently said it will consider foregoing its dividend for 2015.
Increased regulation in most countries in which it operates, low interest rates and high litigation expenses continue to hamper profits. S&P Capital IQ Equity Research forecasts just 5% revenue growth in 2015, followed by a flat year in 2016, due in part to weakness in fixed-income trading. And while Deutsche Bank has taken steps to improve its capital position, analysts say leverage is a “key concern.”
Last week, Capital IQ lowered its price target on DB stock from $37 to $29 because of the bank’s below-average return on equity. Its analysts also cut their 2015 EPS estimate to $2.77 from $2.82 after Deutsche Bank announced a 6.7 billion euro charge due to higher capital requirements and the expected disposal of Postbank.
DB stock formed a massive double-top in late March and late July between $35 and $36. This top is a form of a head-and-shoulders top with a neckline at the support zone of $28.50 to $29.35.
Resistance to a near-term rally is at the 50-day moving average at $29.93. A recent gap opened at $27.15 to $27.99, which could be closed quickly. MACD is currently overbought and high-volume sell-offs have dominated attempts at a recovery.
DB stock appears to be a short-sale candidate at $29 with a minimum price target of $20 for a potential return of more than 30%. Long-term investors should embark on defensive strategies to protect against further losses.
