UPDATE: B. Riley & Co. Downgrades Saba Software to Neutral, Reiterates $14 PT Awaiting Financial Statements

In a report published Monday, B. Riley & Co. analyst Kevin Liu downgraded the rating on Saba Software SABA from Buy to Neutral, but reiterated the $14.00 price target. In the report, B. Riley & Co. noted, “With shares of SABA trading above our price target, we are downgrading the stock from a Buy rating to Neutral. We continue to believe an acquisition of the company, which we acknowledge could garner a healthy premium to our price target, is the likely endgame. Even so, such a scenario is unlikely to transpire before SABA regains compliance with the SEC and puts its longstanding accounting restatement in the rearview mirror. We expect the company to indicate the restatement effort remains on track to be completed by calendar year end during its business update call scheduled on September 30. In the meantime, we note that the business metrics provided in recent quarters have shifted somewhat, focusing more so on new cloud bookings growth and away from total cloud bookings. Although helpful in gauging new business momentum, the limited disclosure into overall cloud bookings leaves us even less certain as to the present run rate of recurring revenues, and hence, less willing to apply a higher multiple to our forecasts. We also hesitate to project out yet another year to help justify a higher valuation given the speculative nature of our model to this point. In short, we think it is simply more prudent to stand pat and await the release of SABA's financial statements.” Saba Software closed on Friday at $14.08.