Feltl And Company Downgrades xG Technology On Backlog, Visibility And Dilution

Feltl and Company downgraded xG Technology Inc XGTI Monday from Hold to Sell and cut its price target from $1.00 to $0.35.

Analyst Jeffrey A. Schreiner believed “XGTI’s backlog is the majority of its current stock valuation" and he saw a risk "that XGTI valuation could be materially overstated given the fact XGTI has been unable to ship prior backlog.”

“XGTI has not announced any new material additions to backlog. With a poor operating track record since its IPO, not delivering one material new contract to backlog in roughly one-and-a-half years, we are unsure how new revenue opportunities will emerge for XGTI.”

Schreiner noted that since “2012 XGTI’s share count has increased to 25m from prior levels of 6m. We believe further future dilution is more than likely in shares of XGTI. It is our opinion estimated share dilution could remain a barrier to XGTI shares moving higher in future periods.”

The analyst note concluded that with “the abrupt resignation of Mr. Townes from its Board, which we believe could negatively impact backlog, limited sales traction to date, long-lived backlog, and dilution risk, we believe shares of XGTI face significant headwinds.”

xG Technology recently traded at $0.81, down 13.8 percent.