Piper Jaffray Reiterates Underweight on RealNetworks (RNWK)

Piper Jaffray is out with a research report this morning, where it reiterates its Underweight rating on RealNetworks Inc. RNWK; it also lowered its price target on the stock to $3.00, from $3.50. The PJ analysts said that the company’s most recent earnings report misses the Street estimates and that the company issued guidance that was below estimates. During the earnings call the company described the completion of its reorganization and outlined its strategy for revenue growth; the PJ analysts believe “the goal of revenue growth will prove to be challenging as the company currently lacks existing and new products that are well positioned for growth.” They also noted that the company’s announcement in Q1 that games revenue was bottomed has note proved to be true with Q2 being another decline and the company forecasting further declines in Q3. They added, “The decline in Games revenue is concerning given investor focus on the segment and Real's prior indications of a potential spinout.” As for valuation, they said, “We maintain our Underweight rating on shares of RNWK and are lowering our target to $3.00, based on an slightly lower multiple of 1.0x CY11E revenue (previously 1.2x CY11E revenue). We believe a lower multiple is justified as visibility remains low.”