Stifel Downgrades Synchronoss Technologies: 'Time Is Not On Their Side'

Synchronoss Technologies, Inc. SNCR — a provider of cloud, messaging, digital and IoT products and platforms — has seen its story "descend into madness" over the past 18 months, according to Stifel, and the firm is turning bearish on the stock. 

The Analyst

Stifel's Tom Roderick downgraded Synchronoss Technologies from Hold to Sell with a price target lowered from $8 to $3.

The Thesis

Over the past year-and-a-half, Synchronoss Technologies' story has been dominated by concerns related to the high level of revenue concentration from top carriers and competitive concerns, Roderick said in the downgrade note. (See the analyst's track record here.) 

Up until this point, a bearish stance couldn't be justified, as the company had multiple levers to pull, including one-time transactions, accounting changes and M&A deals, the analyst said. 

"SNCR is out of levers, and time is not on their side," he said. 

Recent updates now imply the "picture looks tough from our perch," Roderick said. They include: 

• Verizon Communications Inc. VZ's decision in late 2017 to cease offering free storage tiers for clients. 
• The messaging business performed well in the first quarter, but it is now apparent it benefited from a one-time and non-repeating license to an APAC customer,
• By the end of 2019, most of the company's revenue benefits, such as ASC 606, will be gone.
• The spin of the lower-margin, lower-growth activation business seemed logical when announced, but the arrangement that facilitated the shift is questionable.
• Liquidity issues are likely to intensify, as the company has an outstanding $230 million convertible debt instrument due in August 2019.

Price Action

Synchronoss Technologies shares were trading lower by 25 percent at the time of publication Monday at $4.05. 

Related Links:

Mid-Morning Market Update: Markets Down; Caterpillar Tops Q2 Expectations

7 Stocks To Watch For July 30, 2018