The company, which provides digital subscriber lines (DSL), became the second such provider to restate its quarterly revenue this month. NorthPoint, following Covad Communications, reduced its quarterly revenue to $24 million from $30 million because of delinquent payments from its Internet service provider customers.
Gerard Klauer Mattison, an investment banking firm, Tuesday cut its rating on NorthPoint to a "neutral" recommendation from "buy," according to Bloomberg News.
Stock in NorthPoint fell nearly 12 percent to close at $3, a new 52-week low. NorthPoint shares, which have traded as high as $38.50 and as low as $3.25, continued to slide in after-hours trading, settling about 19 percent lower than Monday's closing price.
NorthPoint's troubles are similar to those of competitor Covad, which recently restated its quarterly results after many of its customers, as many as 14 ISPs, also could not pay their bills.
Many broadband ISPs, which are fighting over market share in a competitive sector, are struggling with huge up-front costs, lower-than-expected profit margins, and a shrinking investment capital market. In turn, several have failed to pay suppliers, such as NorthPoint and Covad, on time. Others, including PSINet, are considering alternatives such as selling their businesses.
Analysts continued to have faith in high-speed Net access and the nationwide systems constructed in recent years by NorthPoint, Covad and several others. But broadband stocks, like many in the communications and technology markets, are likely to remain depressed for some time, they say.
"We continue to believe that there is value in the networks that DSL providers are building, but we see little in the way of catalysts that would significantly benefit the stocks at this time," Mark Langner, an analyst at Epoch Partners, wrote in a research report.
Langner reduced his fourth-quarter revenue projections for NorthPoint on Tuesday and increased his projections for a wider quarterly loss. Merrill Lynch and Sands Brothers also downgraded their recommendations on the stock earlier this month.
Conversely, Frost Securities maintained its "accumulate" rating and $9 price target on NorthPoint shares.
NorthPoint said it plans to soon update its fourth-quarter earnings estimate to analysts.