Insweb Corp. (Nasdaq: INSW) tumbled 56 percent Wednesday after it posted a smaller-than-expected loss, but warned revenue would dip due to the departure of its largest customer.
Robertson Stephens cut the stock to "long-term attractive" from "strong buy." First Union Securities downgraded Insweb to "hold" from "strong buy."
Shares in the company, which allows users to comparison shop for insurance, were down 3 5/16 to 2 5/8, far below the company's 52-week high of 44. The stock soared after the company made its IPO in July.
Although Insweb topped estimates by a penny with a first quarter loss of $13.1 million, or 37 cents a share, on sales of $8.6 million, shares crumbled on the outlook.
Insweb said it had lost its biggest customer, and expects a decline in revenue over the coming months.
State Farm Insurance, which currently accounts for about 30 percent of all InsWeb revenue, informed InsWeb April 14 that it would not renew its participation agreement. Effective May 1, State Farm will no longer participate in InsWeb's marketplaces for auto, term life, homeowners, condominium and renters insurance.
"We believe that State Farm's non-renewal will materially reduce our revenues for fiscal year 2000, which have grown significantly to this point,'' said Hussein Enan, CEO of InsWeb, in a statement. "Our preliminary estimate is that revenues for the second quarter of this year will be approximately $5 million. However, with more than $75 million in cash and short-term investments on hand, we are confident that we will not require additional cash in the short term."
As part of a plan to manage expenses, the company announced it will cut its workforce by about 10 percent. It also intends to reduce sales and marketing expenses to align with revenue expectations.
"We will work hard to replace the loss of State Farm with revenues from other carriers," Enan said.