Citing concerns that earnings and credit quality would not justify Wall Street's earnings estimates, Michael L. Mayo of Prudential Securities downgraded J.P. Morgan Chase & Co. Monday and advised investors to sell the company's stock.

"We have never been bullish on Morgan Chase," Mr. Mayo said in an interview, but the downgrading to "sell" from "hold" is significant, even though he has given "sell" ratings to half the companies he covers, he said in an interview. Some investors took the advice. Morgan Chase lost 2.77% Monday during a sluggish session overall. The American Banker index of 225 banks was down 1.48%; the Standard & Poor's 500 index dropped 0.25%; and the Nasdaq 0.67%.

Still, equity analysts say they are divided on Morgan Chase.

Charles W. Peabody of Mitchell Securities has also recommended that investors sell the stock, but James P. Hanbury of Dresdner Kleinwort Wasserstein rates it a "hold."

On the other end of the spectrum is Henry C. Dickson of Lehman Brothers, who is so bullish on the stock that he has given Morgan Chase its only "strong buy" recommendation. First Call/Thomson Financial said analysts' consensus rating for the company is 1.6 on a scale where 1 is "strong buy" and 5 is "sell."

Diane B. Glossman, an analyst at UBS Warburg, reiterated her "buy" recommendation April 5. In a report last week, she wrote that Morgan Chase has made considerable progress in building its investment banking operations, though "the company's financial performance remains closely tied to the direction and scope of the capital markets."

Its credit quality deteriorated in the first quarter but has held up reasonably well, Ms. Glossman wrote. "While weakness in equity markets and related issuance was apparent in a variety of business lines, earnings rebounded strongly from the disappointing fourth quarter."

Mr. Mayo's team, which joined Prudential from Credit Suisse First Boston Corp. in February, has been divided on using the lukewarm "hold" rating; his colleague David Trone still refuses to give it to any company. But Mr. Mayo says he is making use of "hold" ratings as a short-term grade for stocks that are neither good enough to buy nor bad enough to sell.

Morgan Chase, which he gave a "hold" rating in March, has lost the benefit of the doubt, he said, however.

"We decided to initiate Morgan Chase with 'hold' because we liked the long-term global platform," he said. Since then, its share price has risen to $50, despite weakening of earnings and asset quality, Mr. Mayo said.

After reviewing its first-quarter earnings more closely, he decided to advise investors to dump the stock. "The cyclical weakness in the short run is greater than we thought," he said.

"The tough task of integrating the firm's disparate parts gets even tougher due to cyclical weakness caused by the tough operating environment," he told investors in a research note. "Consensus estimates seem to incorporate a strong snap-back in capital markets, which management has said is unlikely."

Morgan Chase has its strengths, Mr. Mayo said. Its consistent vision to build a global wholesale bank impresses him, but optimizing the business may take longer than originally expected, he said.

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