FBR Capital Downgrades Energy Focus (EFOI) to Market Perform
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FBR Capital downgraded Energy Focus (NASDAQ: EFOI) from Outperform to Market Perform. The change follows disappointing Q2 results.
Analyst Carter Driscoll said, "EFOI reported 2Q16 revenue of $7.1M (below its guided range of $10M to $12M), but this was a weak quarter with the "temporary" slowdown of LED sales to the Navy ($3.8M, down 63% QOQ) not looking so temporary. Gross margin at 35.4% was hurt by the mix toward C&I sales, and EPS of ($0.34) were $0.24 worse than expected as EFOI continues to invest heavily in sales/marketing and product development. Revenue from the commercial and industrial (C&I) segment was very disappointing at $3.3M, as project time frames were pushed out. Despite highlighting a number of new wins in C&I (several universities and Costco) and a new Naval customer, the company's 3Q revenue guidance of $8M to $10M suggests a slow C&I adoption rate. We thought EFOI was going to be able to use its strong position in the U.S. Navy to penetrate the C&I market, but that is not the case. As a result, we are downgrading the shares to Market Perform and slashing our estimates and price target. We believe EFOI will have to demonstrate at least two to three quarters of substantial revenue growth and regain profitability before it recaptures investor notice."
Shares of Energy Focus closed at $4.66 yesterday.
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