Story updated at 10 a.m. to reflect market activity.
Shares of FXCM was falling -2.5% to $14.48 in morning trading.
The bank set a price target of $14.50 for the company. The downgrade follows recent stock price appreciation and decreased volumes according to Citigroup analysts.
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Separately, TheStreet Ratings team rates FXCM INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate FXCM INC (FXCM) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strongest point has been its very decent return on equity which we feel should persist. At the same time, however, we also find weaknesses including deteriorating net income, poor profit margins and weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- FXCM, with its decline in revenue, slightly underperformed the industry average of 5.2%. Since the same quarter one year prior, revenues slightly dropped by 9.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 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. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, FXCM INC increased its bottom line by earning $0.48 versus $0.38 in the prior year. For the next year, the market is expecting a contraction of 29.4% in earnings ($0.34 versus $0.48).
- In its most recent trading session, FXCM has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry, implying reduced upside potential.
- The gross profit margin for FXCM INC is rather low; currently it is at 17.56%. It has decreased significantly from the same period last year. Along with this, the net profit margin of 1.86% significantly trails the industry average.
- Net operating cash flow has significantly decreased to -$30.52 million or 192.85% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full analysis from the report here: FXCM Ratings Report