NEW YORK (TheStreet) -- FXCM (FXCM) shares are down 15.09% to $1.35 in trading on Friday after the forex trading services provider received a downgraded valuation from one of its largest lenders as well as a price target downgrade from an independant ratings firm as part of the fallout from the release of its weak first quarter revenue results.
Citigroup analyst William Katz said that holding company Leucadia (LUK) , which was forced to bailout FXCM for a $300 million loan earlier this year after the Swiss National Bank unexpectedly decided to no longer peg the Swiss franc to the euro and instead allow it to float freely, values its loan at about $947 million, according to a report Katz published earlier this week.
After reviewing Leucadia's financials, Katz determined that the company values FXCM at about 80 cents per share, a 41% downside from the stock's current price.
Separately, analysts at Keefe, Bruyette & Woods cut their price target on the company to $1 from $1.50 per share while maintaining its "underperform" rating. The downgraded outlook was a result of the company's reported $98 million in first quarter revenue missing the firm's $107 million expectations.
TheStreet has further coverage of FXCM's fall here.
TheStreet Ratings team rates FXCM INC as a Sell with a ratings score of D-. TheStreet Ratings Team has this to say about their recommendation:
"We rate FXCM INC (FXCM) a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, poor profit margins and generally disappointing historical performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- FXCM INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, FXCM INC reported lower earnings of $0.30 versus $0.48 in the prior year. For the next year, the market is expecting a contraction of 128.3% in earnings (-$0.09 versus $0.30).
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Capital Markets industry. The net income has significantly decreased by 20649.7% when compared to the same quarter one year ago, falling from $2.08 million to -$426.82 million.
- The gross profit margin for FXCM INC is currently extremely low, coming in at 2.79%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -608.05% is significantly below that of the industry average.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 83.67%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 41650.00% compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- FXCM, with its decline in revenue, underperformed when compared the industry average of 5.4%. Since the same quarter one year prior, revenues fell by 15.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full analysis from the report here: FXCM Ratings Report