UPDATE: Stifel Downgrades FARO Technologies as Embedded Expectations Reflect Leverage/Growth Potential

In a report published Tuesday, Stifel analyst Patrick Newton downgraded the rating on FARO Technologies (NASDAQ: FARO) from Buy to Hold, and removed the $50.00 price target.

In the report, Stifel noted, “We are downgrading shares of FARO Technologies from Buy to Hold as shares have eclipsed our $50 price target and our analysis indicates a neutral reward to risk profile at current levels given: (1) FARO's premium valuation relative to historical norms and comparable companies on a P/E basis; (2) our analysis indicating investor expectations are beginning to embed aggressive leverage and earnings power in excess of our above consensus 2015 estimates (implicit $2.50/share +); (3) increasing execution risk; (4) our view that impressive laser scanner growth (FLS and X 330) remains sub-scale; and (5) creeping concerns the Arm business is reaching adoption/penetration levels that are likely to negatively impact future growth relative to FARO's historical high-teens organic revenue growth rate (17% revenue CAGR 2000-2012).”

FARO Technologies closed on Monday at $53.56.