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Ellie Mae hit with downgrade following Q3 miss, others defend

  • Its shares propped up in recent months by M&A hopes, Ellie Mae (ELLI -16.9%) tumbled to levels last seen in July after missing Q3 estimates and issuing below-consensus Q4 guidance, while blaming (among other things) a major slowdown in mortgage applications.
  • Dougherty has cut the mortgage-origination software vendor to Neutral. The firm sees declining loan origination volumes leading Ellie to "face stiffer headwinds" in 2014, and is also worried heavy spending - opex rose 28% Y/Y in Q3 - will pressure margins.
  • But Needham and FBR defended the company: The former says Ellie's report is "[by] no means a disaster" given industry trends, and the latter is pleased with ongoing user and bookings growth; active users for Ellie's core Encompass loan origination platform rose 39% Y/Y to 93.6K.
  • In tandem with its report, Ellie Mae announced it's acquiring MortgageCEO, a provider of CRM (sales) and marketing automation (ad campaign management) software for mortgage providers. Ellie Mae asserts MortgageCEO's offerings complement Encompass, and will help its clients drive loan volumes.
  • The purchase comes at a time when M&A interest in cloud marketing automation firms has heated up.
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