BMO Downgrades Ubiquiti On Miss

Shares of Ubiquiti Networks Inc (NASDAQ: UBNT) are down more than 4.5 percent on Friday afternoon, after the company preannounced poor fiscal third quarter financial results and made public the resignation of CFO Craig Foster. Following these events, analysts at BMO Capital downgraded the stock from Outperform to Market Perform, and lowered their price target from $34.00 to $26.00. The firm also trimmed its fiscal 2015 and fiscal 2016 EPS estimates to $1.98 (from $2.02) and $2.13 (from $2.25), respectively. Although the analysts declare to be "positive on the disruptive business model and products that UBNT produces," they enumerate a few concerns that they believe "will keep the stock in more of a trading range over the next year." Among their worries, we can count:- Emerging markets, which account for at least 30 to 35 percent of Ubiquiti's revenue, are retrieving soft results. The analysts explain: "Economic, political, and currency risks are tough to gauge. As such, we find it hard to determine when these regions will return to a high-growth environment."- While the company has successfully created market-disrupting products in the past, new products have had a slow uptake. Therefore, the analysts do not anticipate a meaningful contribution coming from them for the next several quarters.- One thing BMO likes about Ubiquiti's operating model is "how lean the organization is. With CFO Craig Foster leaving, the company has now seen several high-level management departures over the last few years." The firm views management turnover as a risk to execution.