Topeka Capital reiterates a Buy rating on NQ Mobile with a price target of $33;
NQ's recently released independent investigation showed a clean bill of health. ... it's time to refocus on fundamentals. ... We reiterate our Buy rating and $33 price target following the long-awaited release of the Special Committee's Independent Investigation. As NQ has emphatically maintained since the investigation began in late 2013, the independent committee did not find any evidence that the Company has engaged in fraudulent conduct. ... Now that the investigation results have been released, investors can refocus on the fundamentals. Recall that NQ recently raised guidance for 1Q14 revenues and guided 2Q revenues above consensus. At the same time, NQ announced a 5% outside investment in FL Mobile that values that business at nearly $500mm, suggesting the rest of NQ has only nominal value. We expect NQ to file the 20-F shortly and conduct a 1Q earnings call."
On March 12, 2014 Topeka's Fred Ziegel affirmed his Buy rating and $36.75 price target, before lowering to $30 on April 11, only to raise it half way up again to $33 on May 1.
Ziegel said, "We reiterate our Buy rating ($33 PT) while reducing our 2014 EPS estimate to reflect the margin dynamics of the NQ business model."
"Margin Dynamics"?? What a shill.
So if you listened to Topeka on the March 12 client note when shares were trading at $18.91, you are now down a staggering 47% on your NQ investment. Yet, this guy's been saying BUY, BUY, BUY to $33 the whole time!
Of note are three of the five analysts covering NQ, Piper Jaffray, Canaccord, and Wedge, who've acted responsibly by either terminating or suspending coverage. The lone "outliars" are now Topeka and Macquire.
Fraud allegations aside, the reality is: gross margin is plunging, 1900 basis point YOY and 1070 points sequentially. Gross margin was 48.8% in the fourth quarter of 2013, compared with 67.8% in the same quarter a year ago and 59.5% in the previous quarter. During the ER call, mgt excused the decline in gross margin due to increased revenue contribution of mobile games and advertising, which have lower gross margins than the mobile security subscription revenues. Well, how are mobile games on fire when FL Mobile's itunes publisher account is suspended - or how can NQ's advertising model be relevant when they have no viral social element? Confounding.
If NQ mgt were honest, they would say "our core competency of mobile security software is a failure, as we're paying a fee to the carrier and handset maker for each preloaded device and do not realize any revenues unless users upgrade to the premium model. Furthermore, we are no longer providing free malware updates for our FREE mobile security products because our former revenue gig is up."
As a result, NQ premium users in Q4 2013 stalled out at 15.6mil users, a frightening trend considering the 11 mil to 15 mil Q2 over Q3 growth rate.
the truth is nq's credibility is somewhat tainted and the sad thing is it is not nq's fault. what it is is what it is. i don't see nq 33 at least a few quarters out but i can see that nq could go back to 20 in a matter of weeks. nq is trading at the current level is a steal and it will not be like this long.
Thanks for the news, amid the short clatter.
What I've learned about short sellers over several years of studying their tactics?
The louder the insipid noise level, the closer they are to capitulation.
They go for broke at the end, swinging like punch drunk fighters, hoping to catch a few more weak longs with their guard down or tight stops applied.
They know its over for them here, the smart ones have made their money, now on to a new target.
They are absolute whor*s, and Carson Block is a pimp.