Skullcandy's (SKUL) Higher-Than-Expected Gross Margin Offset Low Revenue; Roth Capital Reiterates Buy
Roth Capital maintained a Buy rating on Skullcandy (NASDAQ: SKUL), and cut the price target to $10.00 (from $12.00), following the company's 3Q earnings report. EPS of $0.08 met consensus, as higher-than-expected gross margin offset slightly lower revenue. Revenue grew 16% YOY to $67.2M, slightly below consensus of $68.6M.
Analyst Dave King commented, "Results generally met expectations, but management lowered 4Q15 guidance to reflect international distribution cleanup initiatives, later-than-normal store resets still occurring ahead of Holiday, and higher taxes. Positive trends included strong sell-through gains, thousands of additional in-store pegs domestically, and meaningful traction for new offerings in a rapidly-growing wireless market amidst continued growth in wired earbuds. Meanwhile, gross margin and balance sheet concerns seem overblown. We reiterate our Buy."
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Shares of Skullcandy closed at $6.34 yesterday.