Tweeter Struggling Under Pressure From Circuit City, Best Buy

by: Eric Savitz

Scot Ciccarelli, an analyst with RBC Capital Markets, today sliced his price target on Tweeter Home Entertainment (NYSE:TWTR) to $3 from $5, while also trimming his earnings forecasts for the fiscal fourth quarter ended September 30 and for the 2007 and 2008 fiscal years.

For the fourth quarter, he increased the expected net loss for the retail electronics chain to 45 cents a share from 38 cents. For fiscal 2007 he went to a loss of 40 cents a share from break even; for fiscal 2008 he now sees a loss of 20 cents a share, rather than the previously expected profit of 25 cents a share. For the December quarter, he dropped his comparable store sales forecast to -7% from positive 1%; his profit forecast for the quarter dips to 25 cents from 44 cents.

The company is expected to report fiscal fourth quarter results on December 6.

Ciccarelli says that while the company is seeing strong sales of flat-panel TVs, that is being offset by plummeting sales of projection TVs - and the company is struggling with fierce competitive pressures on flat panels from Circuit City (NYSE:CC), Best Buy (NYSE:BBY) and others. “We believe the company continues to get hit from competitive pressures as its strategic differentiation from the mass specialists continues to narrow - especially as Best Buy continues to roll out its Magnolia [store within a store]. We suspect these pressures will only intensifty as [flat panel TVs] fall in price. While the stock appears to be trading near liquidation value, we think its fundamentals remain soft and the stock seems unlikely to appreciate substantially in the near-to-mid term.”

Tweeter shares today fell 19 cents, or 7.7%, to $2.28.