Shares in credit-crisis poster child Ambac Financial (ABK) rallied as much as 86% at one point Friday after the beleaguered bond insurer reported a surprise quarterly profit. Reeling from losses incurred on mortgage-backed securities and other dodgy assets, the company has raised the specter of bankruptcy protection repeatedly, something that's kept its stock below a buck for nearly five months.
So it came as something of a shock late Thursday when Ambac reported a fourth-quarter profit of $558.1 million, or $1.93 a share, versus a whopping year-ago loss of $2.34 billion, or $8.14 a share. The surprise profit came from a nearly half-billion-dollar tax benefit -- and there's no Street estimate for the company, according to Thomson Reuters data -- but results still sparked a flurry of speculative buying.
Ambac, which once fetched as much as $95 a share back in 2007, has seen shares trade in a range of 51 cents to $2.09 over the last 52 weeks.
But Morningstar analyst Jim Ryan warned clients that the results weren't quite as strong as the numbers suggest. Ryan wrote Friday: "With little improvement in the housing market (Ambac's primary source of claims) and the potential for a double dip in housing prices on the horizon, which could contribute to the growing inventory of potential foreclosures, we think the future remains opaque, to say the least."
Introduction to Preferred Shares
Learn the difference between preferred and common shares.View Course »