Piper Jaffray Downgrades Echelon (ELON) As Profitability Now Uncertain

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08:40:53 am on February 11, 2010

You knew the downgrades were coming on Echelon (ELON) after yesterday’s very weak guidance and Piper Jaffray is one.  The firm is downgrading the stock to Neutral and lowering the price target to $8 from $11.  Hat tip to Street Insider for the following analyst comment:

“We downgrade shares of ELON to Underweight following disappointing 2010 guidance, continued lack of revenue visibility, and pushout of profitability. ELON beat on the top and bottom line with strength from shipments to Duke and Denmark, but guided to 50% of consensus revenue for 1Q and is only “cautiously optimistic” for “modest” revenue growth in 2010. The company has not demonstrated a consistent build in order momentum following its initial Duke contract announcement and remains burdened with a high opex structure. Given the lowered expectations for 2010, the time to profitability continues to extend further into the future…We maintain our valuation methodology to 2.5x our F11 sales estimate of $139M (from $185M) reflecting ELON’s historical 12-month forward price/sales multiple and more conservatism in the out year…We believe our target multiple is justified given ELON’s LT opportunities offset by its history of losses and uncertain timing on profitability.”

Echelon (ELON) is getting crushed in premarket trading down more than 15%.

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