NEW YORK (TheStreet) -- Shares of Allot Communications (ALLT) are plummeting, down 9.07% to $8.22 in early market trading Wednesday, after the telecommunications company was downgraded to "underperform" from "buy" by analysts at Bank of America/Merrill Lynch this morning.
Analysts at the firm also lowered its price target on shares to $10.50 from $17.
Bank of America/Merrill Lynch cited its concerns over fundamentals due to the company's recent management departures and weak carrier spending for its cut in rating and price target.
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Allot Communications develops bandwidth management hardware as well as software products that help resolve network congestion problems in any network configuration.
Separately, TheStreet Ratings team rates ALLOT COMMUNICATIONS LTD as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:
"We rate ALLOT COMMUNICATIONS LTD (ALLT) 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 strengths can be seen in multiple areas, such as its compelling growth in net income, robust revenue growth and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Software industry. The net income increased by 139.6% when compared to the same quarter one year prior, rising from -$1.93 million to $0.77 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 26.8%. Since the same quarter one year prior, revenues rose by 25.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- ALLOT COMMUNICATIONS LTD reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. Stable earnings per share over the past year indicate the company has sound management over its earnings and share float. However, the consensus estimates suggest that there will be an upward trend in the coming year. During the past fiscal year, ALLOT COMMUNICATIONS LTD continued to lose money by earning -$0.20 versus -$0.21 in the prior year. This year, the market expects an improvement in earnings ($0.33 versus -$0.20).
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Software industry and the overall market, ALLOT COMMUNICATIONS LTD's return on equity significantly trails that of both the industry average and the S&P 500.
- ALLT's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 33.49%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.
- You can view the full analysis from the report here: ALLT Ratings Report