NQ Mobile Inc. (NQ) PT Cut By One Firm, Gets Upgrade From Another

NQ Mobile shares continued their decline today after a significant price target cut from analysts at Topeka Capital Markets. In spite of that cut, however, they maintained their Buy rating on the Chinese company’s stock.

Also analysts at Jefferson Research increased their rating on NQ Mobile from Buy to Sell due to improvements in the company’s balance sheet and earnings quality.

Demand not an issue for NQ Mobile

In his latest report, Topeka Capital analyst Frederick Ziegel noted that he had correctly predicted what happened with NQ Mobile this year. However, he underestimated just how bad sentiment and profitability would be hurt by all that has happened.

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As a result, he slashed his price target from a “very stale” $33 per share to $8.50 per share. He also reduced his estimates for NQ’s 2014 and 2015 earnings per share and the expected multiple. He maintained his Buy rating on NQ Mobile “as the stock is currently selling at cash.”

NQ Mobile upgraded by Jefferson Research last week

Analysts at Jefferson Research upgraded their overall rating for NQ Mobile from Sell to Buy in their report dated Dec. 26, 2014. They upgraded several of their rating areas for the company, which sparked the upgrade to their overall rating.

The analysts upgraded NQ’s earnings quality from Weakest to Strong because the company’s operating cash flow was zero in the last two quarters in spite of the decline in reported net income, which fell to a loss of $17 million from $0 in the previous quarter, and a decline in the quality of the income.

They continued to rate the company’s cash flow quality as Strong even though the quality of its operating cash flow weakened. The Jefferson team said the decline wasn’t enough to move the needle on this rating.

The analysts upgraded their rating on NQ’s operating efficiency from Weakest to Weak because “none of the measures of performance improved over last quarter.” They also upgraded the rating on the company’s balance sheet quality, moving it from Weak to Strongest based on stronger liquidity.

They continue to rate NQ Mobile’s valuation as having the Least Risk. That’s based on the lower possible downward price risk as evidenced by a price multiple that’s lower than the average of the rest of the company’s sector.

American depository receipt shares of NQ Mobile fell as much as 2% during regular trading hours today.