D.A. Davidson downgraded Performance Sports Group Ltd PSG to Neutral from Buy following the uncertainty created by the company's delayed filing of its financials.
Performance Sports said it has delayed the filing of its 10-K, including financial statements, for the year ended May 31, 2016, as the audit committee decides to conduct an internal investigation on the company's financial statements and the related certification process.
As a result of the delayed filing, the company is not in compliance with debt covenants and is expected to default on its credit facilities.
"Lacking confidence in reported financials, as well as uncertainty around PSG's ability to finance its business, we see too many moving parts to the recovery scenario to recommend shares," analyst Andrew Burns wrote in a note.
Despite Performance Sports' earnings being hurt by forex, retail bankruptcies and a slowdown in baseball market, the analyst noted that the delayed filing heightens questions around internal execution.
Burns also cut the price target to $2 from $4 and said he needs improved visibility that some of Performance Sports' current issues have been resolved for recommending the shares.
At time of writing, shares of Performance Sports fell 12.92 percent to $1.82.
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