(By Balachander) Boingo Wireless Inc. (NASDAQ:WIFI) shares were downgraded to "Hold" from "Buy" by Deutsche Bank analyst Brett Feldman based on weaker than expected results/guidance and increasing execution risk associated with the company's growth initiatives.
Feldman wrote his key concern is that Boingo will still have difficulty achieving its reduced full year guidance, which relies on a material reacceleration in revenue growth in 4Q, primarily due to non-recurring advertising revenues. The analyst reduced price target on the stock to $8 from $13.
Los Angeles, California-based Boingo Wireless provides Wi-Fi software and services. Boingo and its Concourse Communications Group subsidiary operate wired and wireless networks at large-scale venues worldwide such as airports, major sporting arenas, malls, and convention centers, as well as quick serve restaurants.
The analyst is of the view that the risk of a miss or further downward revisions may weigh on valuation through year-end. "Longer-term, we still see material growth potential due to the increasing importance of Wi-Fi infrastructure, but prefer to move to the sidelines until visibility improves," Feldman wrote in a note.
Putting aside the near-term execution challenges, Feldman is generally pleased with the company's progress at broadening its revenue opportunities by winning new venues and cultivating a more robust advertising business. "As these new initiatives come on-line over the next few quarters, we should see revenue growth return to a sustained mid-teens rate," the analyst said.
The stock, which has been trading in the 52-week range of $6.01 to $13.25, slumped 23.83 percent to trade at $6.86 on Thursday.