William Blair downgraded Polycom to "underperform" from its previous "market perform" rating. The analyst firm said that recent checks with resellers indicate the consensus estimates for the communication equipment company are at risk.
Analyst Jason Ader said discussions with resellers showed multiple disruptions to Polycom's business including weak video demand and sales execution, an overhaul of its channel partner program that alienated some channels, increased video competition from Cisco (CSCO), and longer-term questions of the company's Microsoft (MSFT) partnership.
About 2.3 million shares of Polycom were traded by 10:58 a.m. Monday, above the company's average trading volume of about 1.2 million shares a day.
TheStreet Ratings team rates POLYCOM INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate POLYCOM INC (PLCM) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, impressive record of earnings per share growth, compelling growth in net income and reasonable valuation levels. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- PLCM's revenue growth has slightly outpaced the industry average of 0.2%. Since the same quarter one year prior, revenues slightly increased by 0.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
- PLCM's debt-to-equity ratio is very low at 0.24 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, PLCM has a quick ratio of 1.97, which demonstrates the ability of the company to cover short-term liquidity needs.
- POLYCOM INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, POLYCOM INC turned its bottom line around by earning $0.30 versus -$0.11 in the prior year. This year, the market expects an improvement in earnings ($0.94 versus $0.30).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Communications Equipment industry. The net income increased by 631.1% when compared to the same quarter one year prior, rising from -$3.99 million to $21.20 million.
- You can view the full analysis from the report here: PLCM Ratings Report