UPDATE: J.P. Morgan Lowering Price Target On Mitel Networks

J.P. Morgan Chase & Co. is lowering its price target on shares of Mitel Networks MITL to $5.50 from $6.50, but is keeping its Neutral rating on shares. In a note to clients, J.P. Morgan Chase & Co. writes, "FQ4 (April) results were solidly above our forecasts. However, FQ1 guidance is below our forecast, reflecting an 11th straight quarter of revenue in the $160M range. We believe Mitel's plan to reshape U.S. go-to-market to a more channel- centric approach could result in improved traction for the next-generation IP and virtualized call control platforms as well as high-margin UCC applications. However, we also see risks from potentially giving channel partners a larger piece of recurring maintenance revenue as well as potentially disenfranchising some customers accustomed to direct relationships. In the meantime, margin improvement could be challenging given a lack of sales leverage, slow transition to higher margin software-based products, and rising opex. Despite trading at an attractive 0.7x EV/revenue and 6.0x EV/EBITDA on our CY12 estimates, we believe demonstrable growth may be necessary to warrant multiple expansion." Shares of MITL gained 11 cents yesterday to close at $4.38.