UPDATE: RBC Capital Downgrades RetailMeNot Inc. (SALE) to Underperform on Fundamental Deterioration

(Updated - February 9, 2016 3:48 PM EST)

RBC Capital downgraded RetailMeNot Inc. (NASDAQ: SALE) from Sector Perform to Underperform with a price target of $6.00 (from $12.00). The change follows Q4 results. Analyst Mark S. Mahaney pointed out that fundamentals are deteriorating at an accelerating pace, and he sees less chance of a turnaround.

"We have been waiting for concrete signs of a fundamental turnaround, but haven’t seen them. And now, the near-term fundamental outlook calls for accelerating deterioration," said Mahaney.

The analyst continued, "Challenges for SALE are multiple: 1. SALE remains susceptible to Search Engine algorithm changes that can dramatically impact traffic levels– SEO still accounts for a majority of traffic, tho the % has been coming down. 2. Mobile is likely leading to incremental usage, but that usage tends to be tougher to monetize– Mobile Revenue Per Visit (RPV) is a quarter of desktop levels ($0.10 vs. $0.43) and may be facing increased commission rate pressure. 3. Both 1 and 2 call into question the strength of the company’s value proposition to both retailers/ consumers. And 4. While SALE’s management team is strong and business model relatively robust, the asset doesn’t appear to have significant strategic value."

Mahaney added, "The company has correctly increased its share repo authorization & and net cash is ~40% of market cap. So there is downside protection. But our fundamental concerns outweigh that factor."

For an analyst ratings summary and ratings history on RetailMeNot Inc. click here. For more ratings news on RetailMeNot Inc. click here.

Shares of RetailMeNot Inc. closed at $8.02 yesterday.

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