UPDATE: Lake Street Capital Markets Downgrades Datalink Corporation as Product Margins Decline More Than Expected

In a report published Wednesday, Lake Street Capital Markets analyst Eric Martinuzzi downgraded the rating on Datalink Corporation (NASDAQ: DTLK) from Buy to Hold, and lowered the price target from $14.00 to $13.00.

In the report, Lake Street Capital Markets noted, “We were forgiving of declining gross margins at Datalink because the company was growing so nicely. But, Q3 laid bare how unpleasant earnings can get when declining margins are matched with a 6% sequential decline in revenue. Given tougher a tech hardware sales macro and Datalink's new, lower product gross margins, we are lowering our rating to HOLD. We thought Datalink could avoid the tech macro—ORCL, IBM and EMC all missed revenue in their most recent quarters—with its focus on wallet share expansion. However, we believe the top line leverage is lost when margins decline so quickly.”

Datalink Corporation closed on Tuesday at $14.25.