Fusion Shares Take a Hit After FBN Downgrades, Noting "Disturbing Developments"

In a report published Wednesday, FBN Securities analyst Shelby Seyrafi downgraded shares of Fusion io FIO from Outperform to Sector Perform and lowered the PT from $15 to $11 following 3Q13 results. Despite new positive hires from LSI, Echelon, and Aflac, Seyrafi noted “disturbing developments” in Tuesday's earning report. These include, “1.) CFO Dennis Wolf is leaving the company (to go to a private company); this lowers the odds of a near- term take-out of the company; 2) James Dawson, chief sales officer, is retiring from the company (although a replacement is expected to be announced shortly). Points 1 and 2 above increase, in our opinion, the odds that near-term results (FQ2/Dec. and FQ3/Mar.) are at risk; 3.) FIO is taking away its prior 20% growth expectation for F2014, and its guidance for FQ2/Dec. revenue of ‘up slightly sequentially' from FQ1's $86M level means that the revenue miss vs. prior $114M consensus is substantial.” FBN Securities commented that their Outperform rating was based on the potential stabilization of the company while finding a buyer. Fusion reported $86.3M in revenue ahead of consensus of $84.7M. NG GM was reported at 59.4 percent versus consensus of $57.1 percent, and operation margin came in 5.6 better than expected at -13.3 percent. FIO estimates that revenue, NG OIM, and GM will be up Q/Q for the FQ2/Dec. quarter. Fusion closed at $12.98 on Wednesday and is currently trading at -25.73 percent.