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Digital maps provider Navteq (NVT), which jumped sharply Monday on the acquisition of rival Tele Atlas by GPS device maker TomTom, was backtracking Tuesday following a downgrade by Bear Stearns analyst Peter Barry, who cut his rating to Peer Perform from Outperform.

Barry says Navteq’s valuation is now too high. “Our conviction in the growth prospects for GPS-based navigation systems remains very strong, but, given this move, underlying company valuations now appear stretched,” he writes in a research note.

While we cannot ignore that scarcity value spawns or accelerates M&A interest in Navteq, any further premium valuation would be tough to justify based upon existing fundamentals, and would probably be meaningfully dilutive to any acquirer.


NVT 1-yr chart:

nvt chart