Velti (VELT): a 25% Sell-Off and Now a Downgrade

January 31, 2013 7:22 AM EST Send to a Friend
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Price: $0.06 --0%

Rating Summary:
    3 Buy, 7 Hold, 1 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 0 | Down: 0 | New: 0
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Shares of Velti (NASDAQ: VELT) fell 25 percent yesterday afternoon following cautious management comments from the company's analyst day. Today analysts at Wells Fargo are weighing in and have downgraded shares from Outperform to Market Perform and lowered their valuation range from $10-12 to $4.50-6.00.

"Though we believe management did a solid job of outlining the evolution of the mobile marketing landscape, the range of Velti's capabilities, and the significant opportunity ahead for the company as the market matures, we have growing concern that 2013 will prove to be a year of transition for VELT as management works to correct areas of weak execution," analyst Peter Stabler states. "Based on our interpretation of CFO Ross' comments, we expect greater discipline on contract quality and geographical mix will have a significant negative impact on both revenue and EBITDA growth in the near term."

They note CFO Ross declined to offer a range of formal guidance for 2013, but made it clear to attendees that "smart growth" and improving Velti's cash flow generation are his top two priorities. "Though his remarks were brief, we came away convinced that the cash collection weakness that has challenged Velti over the last year has likely been due to an over-reliance on growth from customers (primarily in Eastern Europe/Middle East/Africa) with poorly structured contracts, where contracts with weak payment terms may have been renewed in exchange for headline growth increasing the level of delayed payment risk."

The firm leaves Q4 2012 estimates unchanged, but lower our 2013 revenue and adjusted EBITDA estimates 5% and 13% to $337MM and $80MM respectively, while non-GAAP EPS falls to $0.61.

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

Shares of Velti closed at $4.09 yesterday.




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