US Search.com (Nasdaq: SRCH) shares were among the biggest percentage losers on the Nasdaq Friday after the company fell short on fourth quarter revenue. Analysts downgraded the stock across the board.
At midday, US Search was down 2 7/8 to 7 1/2, or 27 percent.
After the closing bell Thursday, US Search reported an operating loss of 36 cents a share, or $6.35 million, on sales of $6.1 million. The loss beat First Call estimates by a penny, but revenue fell short of projections and was down from the third quarter.
US Search, which provides Internet-based public document searches, has been trying to position itself as a business-to-business player. In the fourth quarter, B2B revenue was 19 percent of total sales.
Two analysts were not impressed with the quarter and downgraded the stock. The downgrades were especially biting because both analysts worked for firms that underwrote US Search's June initial public offering, which priced at $9.
Lead underwriter Bear Stearns cut the stock to "attractive" from "buy." The brokerage cited lower-than-expected revenue. Bear Stearns said revenue dropped from $6.2 million in the third quarter and fell well below its target of $6.5 million.
US Search's margins also fell to 51 percent in the fourth quarter, well short of Bear Stearns 57 percent target.
"This is the second quarter of gross margin under-performance, which is surprising for a company whose revenues continue to shift out of lower-margin telephone sales into higher-margin Internet sales," wrote analyst Scott Ehrens in a research note.
Ehrens cut his fiscal 2000 revenue estimate to $32.5 million from $35.9 million.
Wit Capital analyst Ryan B. Alexander cut the stock to "neutral" from "outperform."
In a statement, Alexander said the company is burning too much cash. The company "may be forced to substantially reduce its advertising and promotion expenditures in order to reduce its current cash burn rate.''
Wit also participated in the US Search IPO.
Reuters contributed to this report.