Stifel says sell RetailMeNot on deteriorating traffic trends

Shares of RetailMeNot (SALE) plunged in afternoon trading after the stock was downgraded by an analyst from Stifel, saying third party data indicates that the company's traffic trends have deteriorated recently. STIFEL SAYS SELL: Before the market open, Stifel analyst Scott Devitt downgraded RetailMeNot to Sell from Hold with a $9 price target, saying that third party data suggests that the company's traffic trends have deteriorated recently. The analyst said that the recent appreciation in shares is "overextended" given evidence of softer current traffic trends and limited 2017 growth estimates. Devitt noted that he thinks that RetailMeNot is moving in the right direction with the integration of new verticals, new location and attribution tools, and new user interface features, specifically on mobile, which should help offset ongoing slipping in the core desktop business. On the other hand, the analyst maintains that the road back to sustainable growth is still uncertain at this point and that shares are discounting the risks from the transition to mobile. Devitt also reduced his outlook for the company, expecting fiscal 2016 revenue below consensus estimates of $289M to $287M from $291M based on "more pronounced declines" in desktop traffic in the second half of 2016. The analyst noted that the firm previously modeled a narrowing in the decline in desktop traffic, but the greater emphasis on mobile capabilities, particularly the launch of the food category in the third quarter, led the firm to believe more users will navigate the company's properties through mobile devices. Devitt said he is carrying this trend forward in 2017 with revenue estimates reduced below consensus of $314M to $307M from $312M as desktop declines are only somewhat offset by greater mobile traffic and revenue. The analyst noted that his in-store and advertising revenue estimates remain unchanged. WHAT'S NOTABLE: Two weeks ago, Morgan Stanley analysts led by Brian Nowak cut the firm's Internet sector view to In-Line from Attractive as a result of more balanced risk/reward. At the time, Nowak said he favored large caps and remained bullish on Facebook (FB), Priceline (PCLN), Alphabet Class A (GOOGL), Amazon (AMZN), and Zillow (Z). At the same time, the firm downgraded RetailMeNot, TrueCar (TRUE), Rubicon Project (RUBI) Underweight from Equal Weight. PRICE ACTION: RetailMeNot is down nearly 22% to $8.84 in afternoon trading. Shares are down about 11% year-to-date.