Slew of Internet, Technology Companies Downgraded on Weak Consumer Spending

by: Eric Savitz

The analysts at American Technology Research Monday morning downgraded a variety of high-profile technology and Internet companies with consumer exposure, citing concerns about the weakening outlook for consumer spending.

“Our tech team came away from last week’s CES looking like it had seen a ghost,” Internet analyst Tim Boyd wrote Monday morning. “That ghost in the U.S. consumer.” Boyd reports that nearly every one of the 40-plus companies they met with were “extremely bearish” on the near-term demand outlook and plan to cut jobs. “While we realize that investors are aware that ‘it’s bad out there,’ we are not sure they realize quite how bad. The consumer has put on the brakes hard in January.”

Here’s a rundown on their rating and estimate cuts:

  • Amazon (NASDAQ:AMZN): Downgraded to Sell from Neutral; price target to $35, from $40. Cuts ‘09 EPS estimate to $1.08, from $1.53. “AMZN has a tough decision to make - will it attempt to grow its top-line come hell or high water, or will it instead try to preserve gross margin? It cannot do both.” He’s betting they take the first route, and focus on top-line growth.
  • Blue Nile (NASDAQ:NILE): Downgraded to Sell from Neutral, target to $15, from $21. Cuts ‘09 EPS estimate to 70 cents, from 89 cents.
  • (NASDAQ:BIDZ): Downgraded to Neutral from Buy, target to $5, from $10. Cuts ‘09 EPS estimate to 48 cents, from 62 cents.
  • Yahoo (NASDAQ:YHOO): Downgraded to Neutral from Buy; price target to $14.50, from $18. Writes analyst Rob Sanderson: “The fundamentals remain challenged amidst slower e-commerce sales. Merger of acquisition possibilities keep a floor on the stock.”
  • Akamai (NASDAQ:AKAM): Downgraded to Neutral from Buy. “We expect a significant decline in online retail and tech spending and think investors may be able to build positions at better prices,” Sanderson writes.
  • Nokia (NYSE:NOK): Downgraded to Sell from Neutral. Analyst Mark McKechnie writes that the downgradd reflects near-term consumer weakness and long-term concenrs on its positioning in smartphones.
  • Cisco (NASDAQ:CSCO): Downgraded to Neutral from Buy. He cut his FY ‘09 EPS estimate to $1.30, from $1.34; for 2010 he goes to $1.35, from $3.40. McKechnie write that is likely “to see a a delayed recovery givne the weaker-than-expected holiday season.
  • Marvell (NASDAQ:MRVL): Downgraded to Neutral from Buy. His EPS estimate for the January 2010 fiscal year drops to 45 cents, from 55 cents. McKechnie says the lowered forecast reflects “a slower than expected inventory burn in PCs.”

In Monday’s trading:

  • Amazon was down $3.01, or 5.4%, to $52.50.
  • was down 47 cents, or 11.5%, to $3.61.
  • Blue Nile was down 75 cents, or 3.5%, to $21.01.
  • Yahoo was down 85 cents, or 6.5%, to $12.28.
  • Akamai was down 82 cents, or 5.4%, to $14.31.
  • Cisco was down 25 cents, or 1.5%, to $16.45.
  • Marvell was down 41 cents, or 6%, to $6.45.
  • Nokia was down 40 cents, or 2.6%, to $14.81.