March 7 (Reuters) - Shares of business process outsourcing (BPO) company PeopleSupport Inc PSPT.O touched a new 52-week low on Friday, a day after it forecast 2008 results well below market expectations as some of its technology clients were facing a slowdown.
PiperJaffray downgraded the stock to “neutral” from “buy,” on falling revenue from the company’s client EarthLink Inc ELNK.O, increased competition from multinational BPO providers and a deteriorating macro environment.
“We are concerned EarthLink, the company’s fourth largest client, may now be retracing Vonages’ steps, leaving another significant revenue hole to fill,” analyst Mark Marostica said in a note to clients.
In March last year, Vonage Holdings Corp (VG.N), which contributed $14 million to PeopleSupport’s 2006 revenue, had not renewed it contract with PeopleSupport, allowing it to expire in May 2007.
Marostica cut his price target on PeopleSupport’s stock to $8.50 from $16.
Cowen & Co analyst Moshe Katri said the 2008 outlook reflected more weakness from two of its 10 top clients, EarthLink and Expedia Inc (EXPE.O) and the impact from weaker utilization rates.
He maintained his “neutral” rating on the stock.
For 2008, the company had forecast earnings of 47 cents to 58 cents a share, on revenue of $162 million to $170 million. Analysts on average were expecting earnings of 72 cents a share, on revenue of $180.3 million, according to Reuters Estimates.
Shares of the Los Angeles-based company were trading down 33 percent at $7.63 in midday trade, after hitting a low of $6.77 on Nasdaq. (Reporting by Sayantani Ghosh in Bangalore; Editing by Vinu Pilakkott)