But has the chatter obscured softening fundamentals?
Canaccord Adams analyst Peter Misek thinks so. Yesterday, he cut his ratings on 3 major players:
- Research In Motion: To Hold, from Buy.
- Apple: To Hold, from Buy.
- Nokia (NOK): To Sell, from Hold.
- Palm: Maintains Sell rating.
Misek notes that the four stocks are up on average 105% since March, beating the Nasdaq Composite by 60 percentage points. Valuation multiples, he writes, have hit nine-month highs. And he says that there are signs that U.S. consumer spending is softening again after a healthy bounce in the spring. One reason for that, he thinks, is the sharp rise in oil prices, with gasoline up 63% year-to-date and 27% int he past month.
“In our opinion, the stellar share price returns since March, in combination with incrementally negative data points from our channel checks suggest that we may be in store for a modest correction over the summer months,” he wrote. “As such, we believe it appropriate to make a tactical decision to move to the sidelines until such time that the U.S. consumer begins to regain momentum or share prices have corrected to more favorable risk/reward levels.” He adds that, while the worst of the recessions is behind us, “the market has in our view already begun to discount a major V-shaped recovery.”
Despite the downgrades, Misek issued some new, bullish-sounding unit forecasts for the four players.
- For Apple, he raised his June quarter iPhone unit forecast to 5.5 million from 4 million, reflecting the new $99 price point for the 8 GB phone.
- For RIMM, he now sees August unit shipments of 9 million, up from 8.3 million.
- For Nokia, his June quarter unit forecast goes to 105 million, from 98 million.
- For Palm, he introduces a new forecast of 7 million WebOS based phones in FY 2011.
In a follow-up note Wednesday, Misek pointed to the results this morning from Best Buy as further evidence of weakness in consumer spending. He notes that the retailer’s same-stores sales decline of 6.2% was worse than the 3%-4% decline in the Street had expected. “Best Buy’s results and conference call re-affirmed several of the concerns we raised,” he writes. In particular, Misek notes that Best Buy said the weakest month was May, which he says “corroborates our view that the bounce we began to see early in the spring has shown signs of fading.” He also said Best Buy’s comment on inventory lead him to believe that the restocking tailwind the consumer electronics vendors saw earlier this year may be finished until demand picks up. And he says that Best Buy indicated that credit partners had began to make adjustments to their policies in response to increased charge offs and the potential for new credit-card legislation. “We belieeve these comments reflect a drop-off in financing approval rates, which we expect could hamper near-term purchasing, he writes.
In Tuesday’s trading:
- AAPL rose 26 cents, or 0.2%, to $136.35.
- RIMM fell 9 cents to $80.29.
- NOK fell 17 cents, or 1.1%, to $14.79.
- PALM rose 23 cents, or 1.6%, to $14.35.