Analyst On NQ Mobile Not Phased By 'Accounting Overstatement' Comment, Reiterates Buy

In a report published Friday, Topeka Capital Markets analyst Frederick Ziegel reiterated a Buy on

despite the company's overstatement comment in Thursday's press release. On Thursday, NQ Mobile announced fourth quarter and fiscal year 2013 results. The company reported fourth quarter EPS of $0.22. Net revenue came in at $67.9 million for the quarter, up 126% year-over-year. Fiscal year 2013 net revenues increased 114.3% year-over-year to $196.7 million. Loss from operations for the year was $4.5 million compared with $2.3 million income from operations in 2012. In the press release, the company reported that it identified an accounting overstatement "relating to share based compensation expense in the unaudited financial results for the three months and nine months ended September 30, 2013 as previously reported in the Company's quarterly result announcement on Form 6-K dated November 12, 2013." The correction of the clerical error resulted in a $369,624 reduction in general and administrative expenses and in the total amount reported for net loss. This also resulted in a $0.0013 reduction for basic net loss per share and diluted net loss per share. Topeka's reiterated a Buy on NQ Mobile and reduced 2014 EPS estimates to better reflect the margin dynamics of the company's business model. Ziegel wrote, "While our revenue estimates are increased (again), margins will reflect greater contributions from today's lower margin services although we do expect margins to improve as the year progresses. What's not to be missed is that hardware revenues should lead to higher GM Mobile Device Management (MDM) service revenues as we detail in today's report." Due to the lower EPS estimate, Topeka lowered the price target from $36.75 to $30.00. Shares of NQ Mobile closed at $15.99 on Thursday. NQ Mobile has traded as low as $13.13, down 21.78%. Shares are currently down 20.22% at $13.30.