On Thursday, the company reported third quarter revenue of $20 million, and a GAAP loss of 10 cents a share; the revenues were lighter than expected, and the loss was larger. Donald Katz, the company’s founder and CEO, said in the company’s release last night that the company “did not achieve the top-line growth expected.”
Now, here is the fun part: Friday morning, the stock was the subject of a pair of rating downgrades - and one upgrade. (A fourth analyst kept his rating, but cut his price target.) Based on the stock’s behavior Friday (up over 8%), the upgrade must be more persuasive. And that’s kind of interesting, because it is hardly a ringing endorsement, as you will see in a second. Here’s a peak at what the analysts said Friday morning:
- Ross MacMillan, Jefferies: We are upgrading our rating on ADBL to Hold [from Underperform] and raising our [price target] to $7.50 [from $6.50]…Things are deteriorating at a diminishing rate at the company. We expect bookings per member to stabilize, at which point bookings and revenue growth could accelerate…The key metric is bookings per member. These started to collapse when the company changed subscription plans last year. While this metric is still deteriorating, it is doing so at a declining rate…The stock has significantly underperformed the market since we launched [coverage], and we now feel things are getting less worse.
- Darren Aftahi, ThinkEquity: Downgrading to Source of Funds [from Accumulate]. Audible is clearly not executing to plan, as was the case again in [the third quarter.] with management still lacking a solid handle on revenue visibility of its its new membership programs after three quarters, and its non-Apple business showing signs of slowing growth, we believe investors should stay on the sidelines until the company can clearly demonstrate consistent profitable growth and execute to plan.
- Richard Fetyko, Merriman Curhan Ford: Despite improvements in subscriber additions and churn, Audible continues to struggle with operating leverage and profitability. The company does not appear to have found the right formula for customer acquisitions and subscription plan offerings, and the operating expenses have not flattened out as expected…Downgrading to Neutral.
- Mark Mahaney, Citigroup: ADBL’s business model is still in transitoin - marketing is still at an experimental stage, pricing plans may be changing again, and new initiatives (education, UK, wireless) are not yet making material contributions. The product however keeps improving…Lowering our [price target] from $10 to $8.50 but maintain our Hold rating.
Related: Audible Q3 2006 Earnings Call Transcript