The Details Behind Merriman Curhan Ford's Nov 5 Downgrade of Geeknet (LNUX) to Neutral
"...Merriman analyst says, "We are downgrading LNUX shares to Neutral due to a lack of visibility into the turnaround of the Online Media segment and increased cash burn, which undermines the “backstop” for the stock (cash and NOLs). Under the new management, the Online Media segment has remained flat for the last three quarters, which considering the macro headwinds is perhaps commendable. However, our visibility remains poor. The company continues to introduce and sell premium ad placements with very high CPMs ($50s) and is refocusing on deeper penetration of its large advertising clients in the technology sector as well as premium brands in some non-endemic verticals, but is deemphasizing mid-level clients that took up resources and did not scale up...E-Commerce segment continues its steady growth. ECommerce revenue increased 11% Y/Y, despite the difficult consumer spending environment, and is projected to actually accelerate its growth in 4Q09 to the12-24% range..."
Note: LNUX closed at $1.15 Nov 4th, the day before Merriman released its downgrade. Also, Geeknet (LNUX) is now on a calendar year. Q4 2009 ends 31 December (vs. q1 2010 ending January 31).