Janney Montgomery Scott Downgrades Online Resources (ORCC); Doesn't Appear Sale of Company is Imminent

Janney Montgomery Scott downgrades Online Resources (Nasdaq: ORCC) from Buy to Neutral. Price target lowered from $8 to $6.

We are lowering our rating to NEUTRAL on ORCC, as it does not appear a sale of the company is imminent. Our BUY rating was justified on a take-out valuation of $8.00 per share, which assumed 8.0x pro-forma EBITDA after synergies. Yesterday after the close, the company reported mixed 3Q results, which included weaker than expected revenue trends and lowered full-year revenue guidance, as the number of bill pay transactions in the company's Banking segment (61% of total revenues in 3Q) experienced year over year declines for the sixth straight quarter, to 38.5 million transactions (-1.5%). While there is operating leverage in the business model, constraints such as declining higher margin float income and weak transaction growth will make this leverage difficult to achieve in the near term. We believe a Neutral rating is appropriate in light of these challenges, and we would be looking for follow-through on positive new business commentary into fundamental acceleration before getting more constructive on this name."

http://www.streetinsider.com/Downgrades/...