Morgan Stanley Downgrades MobileIron On 'Lack Of Visibility'

In a report published Thursday, Morgan Stanley analysts downgraded the rating on

from Overweight to Equal-Weight, while reducing the price target from $13 to $7. The downgrade comes in the wake of company's preannouncement of weak 1Q results. Mobileiron attributed the expected shortfall in its 1Q revenue to several large North American deals that were not closed and a mix shift by customers to monthly subscriptions. The company also revised its billings guidance downward. The miss shows that Mobileiron's channel visibility and control are poor. "The March quarter miss seems to make clear that the company has less channel visibility and control than thought. The lack of visibility into how deals are progressing, as well as how those deals will be constructed (e.g. perpetual, subscription) seems to have contributed to the quarterly shortfall. Additionally, MOBL does not provide any KPI metrics (e.g. subscribers, users, average pricing or monthly ARPU metrics) that would allow investors to see progress developing long-term subscriber value," the analysts stated. The poor results and the lack of transparency are likely to restrict the company's share price in the near future. "While we still believe MobileIron can gain be a share winner, their lack of control over distribution makes executing on that opportunity increasingly difficult. One potential positive outcome may be that the Board and VC investors may be more willing to consider a potential sale of the company at 3-4x revenue," the analysts added. The revenue growth estimates for 1Q and 2015 have been reduced from 34 percent to 22 percent and 34 percent to 21 percent, respectively.