Needham & Company Remains Bullish on Daktronics (DAKT) Despite a Sell Off Following 3Q Miss

Needham & Company maintained a Buy rating on Daktronics (NASDAQ: DAKT), and cut the price target to $9.00 (from $9.50), following the company's 3Q earnings report. Revenues for the seasonally weak FQ3 increased to $123.8M, modestly above consensus estimates of $122.5. However, the company posted an unexpected loss of ($0.04), versus a consensus EPS of $0.03.

Analyst James Ricchiuti commented, "DAKT shares sold off 11% yesterday after FQ3 EPS came in below expectations due to lower gross margins resulting in part from higher warranty expense associated with certain digital billboards that were sold prior to 2012. The company is still sizing potential failure rates on a component in these displays, and this issue could weigh on margins into early F17, albeit with less onerous effects. Orders were down y/o/y, although backlog remains solid, up 17% y/o/y. While the risk-reward is less attractive given the uncertainty around the extent of future warranty charges, we are going to maintain our Buy rating based on the potential for a modest recovery in demand and more gradual improvement in margins. Assuming that scenario plays out, we believe the stock is attractive, trading at 6x EV/estimated outyear EBITDA."

For an analyst ratings summary and ratings history on Daktronics click here. For more ratings news on Daktronics click here.

Shares of Daktronics closed at $7.71 yesterday.

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