UPDATE: Piper Jaffray Downgrades DTS to Underweight, Lowers PT

In a report published Friday, Piper Jaffray & Co. downgraded its rating on DTS DTSI from Neutral to Underweight, and lowered its price target from $23.00 to $16.00. Piper Jaffray noted, “Q3 results came in lower than expected, especially on the bottom line, primarily due to the impact of increased opex, but also little-to-no revenue recognized from the SRS acquisition and an abnormally high tax provision. Additionally, the company lowered both FY12 and FY13 revenue guidance due to weak macro conditions surrounding the CE market. DTS continues to diversify away from Blu-ray (~30% of revenue in 3Q, inline with connected devices). The SRS deal furthers the diversification, but will result in the remainder of CY12 & early CY13 being a transition period. We are lowering to Underweight and continue to take a wait-and-see approach to the long-term (1-2 years) due to DTS' position as an optional standard on connected devices compared to its mandatory inclusion in Blu-ray, which will fade longer-term (company expects Blu-ray will peak in 2015-2016). Additionally, near-term trends appear unfavorable for DTS' end markets.” DTS closed on Thursday at $20.62.