Seeking Alpha

Violin Memory trounced on Q3 results and guidance, 3 downgrades

  • Violin Memory (VMEM -43.3%) shares continue to dive following abysmal Q3 results and guidance.
  • Adding fuel to the fire are downgrades from IPO underwriters J.P. Morgan (Overweight to Neutral, PT to $5.50 from $9), Deutsche Bank (Buy to Hold, PT to $3.50 from $10), and Pacific Crest (Outperform to Perform).
  • Deutsche analyst Chris Whitmore cited the Q3 revenue miss and weak Q4 guidance. VMEM is burning $27M in FCF a quarter and has not "articulated a plan to reduce it," which suggests that it can survive 5 more quarters at the going rate.
  • Problematically, "Poor execution as a new public company & its high cash burn rate challenge mgmt's credibility with investors, its ability to raise add'l capital & VMEM's multiple will compress on substantially lowered expectations," Whitmore concludes.
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