LF - now all the brokerage houses downgrade
LeapFrog shares dive on third-quarter warning
Tue Oct 19, 2004 09:52 AM ET
NEW YORK, Oct 19 (Reuters) - Shares of LeapFrog Enterprises Inc (LF.N: Quote, Profile, Research) plunged on Tuesday, after the educational toy maker slashed its third-quarter forecast, citing a tough industry environment and weakness in its core LeapPad toy line.
Shares were down 32 percent at $12.40 in morning trade, its lowest point in 2 years.
"We are lowering our rating on the shares of LeapFrog to neutral," Merrill Lynch Lauren Rich Fine wrote in a research note. "While there are potential positive catalysts, such as a lower stock price, i.e. valuation, and new product introductions, management credibility has taken an even bigger step down at this juncture."
The news, released after the close of the stock market Monday, is the latest in a string of negative reports from the Emeryville, California-based company.
In part, LeapFrog blamed weak U.S. sales of its primary product, the LeapPad, a junior-sized laptop system that holds interactive workbooks, for the earnings miss.
Piper Jaffray analyst Anthony Gikas cut his rating on LeapFrog to "underperform", and cited execution risks, management credibility, and deteriorating margins as catalysts for the downgrade.
"LeapFrog's problems date back one year now and we think execution remains a challenge and visibility is limited," said Gikas. "We advise clients to reduce positions in LeapFrog until visibility improves and confidence in execution increases."
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