NEW YORK (TheStreet) -- NQ Mobile (NQ) fell early Friday but then surged as it announced it had removed PricewaterhouseCoopers Zhong Tian LLP as its independent auditor and hired a replacement to review its 2013 financial statements.
The company said in a statement Friday it hired Marcum Bernstein Pinchuk LLP as its new auditor because PwC requested information the company does not have, which could impede NQ's obligation to file its 2013 annual report. NQ has twice delayed reporting its audited full-year results to U.S. regulators.
The Chinese mobile security company again said its previously-disclosed financial results are accurate.
Short seller Carson Block's research firm Muddy Waters said on Oct. 24, 2013 that the Beijing-based company had exaggerated its revenue and improperly represented its cash balance.
The stock closed at $4.35 on Thursday and opened at $3.51 on Friday, but quickly recovered and was up 12.87% to $4.91 at 10:54 a.m.
Separately, TheStreet Ratings team rates NQ MOBILE INC -ADR as a "sell" with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:
"We rate NQ MOBILE INC -ADR (NQ) a SELL. This is driven by a number of negative factors, 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 deteriorating net income, disappointing return on equity, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- 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 Software industry. The net income has significantly decreased by 206.8% when compared to the same quarter one year ago, falling from $4.87 million to -$5.20 million.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Software industry and the overall market, NQ MOBILE INC -ADR's return on equity significantly trails that of both the industry average and the S&P 500.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 53.81%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 200.00% 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.
- NQ MOBILE INC -ADR 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. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, NQ MOBILE INC -ADR swung to a loss, reporting -$0.06 versus $0.18 in the prior year. This year, the market expects an improvement in earnings ($1.25 versus -$0.06).
- The gross profit margin for NQ MOBILE INC -ADR is rather high; currently it is at 51.61%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, NQ's net profit margin of -7.66% significantly underperformed when compared to the industry average.
- You can view the full analysis from the report here: NQ Ratings Report