Uncertainty Trumps Potential For Power Solutions; Wunderlich Downgrades

Shares of Power Solutions International Inc PSIX were halted on a circuit breaker during Friday's trading session after the company received notice that its independent accounting firm will no longer be providing its services and that the company's chief financial officer Michael Lewis will also take a leave of absence.

Downgrade

In a research report on Monday, Liam Burke of Wunderlich downgraded shares of Power Solutions to Hold from Buy with an unchanged $18 price target given the concerning announcements which were disclosed last week.

Burke highlighted the company's need for an internal review relating to allegations made by a former employee relating to the financial reporting. In addition, the company has not filed its 10-Q for the quarters June 30 and September 30. Accordingly, the analyst believes it is difficult to make reasonable forecasts surrounding the company's future without suitable financial disclosures.

Not All Negative

Burke did, however, note that Power Solutions is reviewing options, which can improve the company's capital structure and liquidity. Some of the options which may be on the table include financial restructuring, merger, acquisitions, joint ventures or an asset sale.

"Despite the benefit of cost reductions and contracts that could drive future revenue, the current financial uncertainty outweighs any future potential, in our opinion," the analyst argued.