Piper Jaffray Says 'Lack Of Visibility' At LeapFrog Warrants Caution

In a report published Friday, Piper Jaffray analyst Stephanie S. Wissink maintained a Neutral rating on

, while reducing the price target from $2.50 to $1.50. Analyst Stephanie S. Wissink said, "We expect LF shares to reset lower and to form a new trading range following another disappointing quarter and what appears to be little/no confidence around forward estimates. While management attempted to guide, the framework for assumptions remains cloudy." LeapFrog's core business has been witnessing a steep decline in sales, at more than 30 percent per year for the last couple of years. This has created excess inventory in the channel. Since the company is committed to the category, it will "continue R&D spend to introduce new platforms in FY16 & FY17," Wissink added. LeapFrog also plans to expand its lower risk business - toys, outlicensing, adjacent categories, etc. "Visibility remains highly clouded and owning shares is highly speculative," Wissink commented. While the company reported dismal 4Q results, it's difficult to tell whether the guidance is "conservative enough." The guidance calls for FY16 sales to decline "considerably" and for op losses to be similar to or greater than the figure of -$85mn reported for FY15. Piper Jaffray has reduced the EPS estimate for FY16 from ($0.65) to ($1.17). "While a shift in revenue mix toward content & integrated assessment have been a catalyst we've been calling for over the last 18 months, we fear it's too late," Wissink stated.