Wunderlich 'Giving Up On Iconix,' Downgrades To Hold

In a report published Friday, Wunderlich analyst Eric Beder downgraded the rating on

from Buy to Hold, while lowering the price target from $36 to $16, following the announcement by the company that long-time CEO Neil Cole was stepping down from his position with immediate effect. The analyst believes that the announcement completed "what has been a stunning fall from grace for the company over the last year," during which time the stock declined 50 percent. "We believe the company's ability, especially with a new CFO, to offset organic revenue declines with material one-time items and joint venture gains has become basically impossible and that the board was forced to take action," Beder stated. In addition, while the company retains robust free cash flow, the limited experience of the current management team means that there is likely to be limited credibility for the team in the near term. The analyst believes that the board asked CEO Neil Cole to resign, given the timing of the announcement and the continued weakness in the stock. Recruiting a new CFO might also be part of the same process. "Board member Peter Cuneo has been named chairman of the board and interim CEO," according to the Wunderlich report. Iconix Brand witnessed organic revenue declines in 2012, driven by its maturing brands. However, instead of changing the business model to focus on cash flow, the management decided to undertake joint ventures, asset sales and one-time items that could only offer "an illusion of organic growth." With a new CEO, COO and CFO, the analyst believes that the management will have to work on rebuilding credibility with investors in the near term. However, the analyst does not expect a new CEO to be appointed before 2016.