Gadget Stock Watch: Garmin's Cloudy Outlook, Apple's Rally, More

1. Garmin loses its way. Garmin (GRMN) fell 5.25% to $75.99 (-16% intra-day) in heavy trading Wed., following a downgrade by Deutsche Bank to "hold" from "buy." The DB analysts, concerned about competition and pricing in the U.S., lowered their target to $90/share from $125. Last week, CIBC trimmed its revenue estimate on expectations of a drop in ASPs and lower EU demand. Meanwhile, an S&P analyst maintained his "buy" rating for GRMN, even saying the company looks undervalued based on expected sales growth, but cut GRMN's target to $115 from $136.

2. Best Buy to embrace Mac. Apple (AAPL) rallied 4.8% to $179.40, boosted by a report that Best Buy plans to nearly double its number of stores selling Macs to 500 by Feb. 2009. Also helping Apple's cause: expanded iTunes movie rentals and Bill Gates saying Microsoft (MSFT) will not compete directly against the iPhone. Piper Jaffray analyst Gene Munster says Apple is a year ahead of the competition. Best Buy (BBY) gained 1.7% to $46.43, but gave it all back in late trading, ahead of retail Thursday and the company's Dec. sales report due Friday.

3. Circuit City selloff. Shares of the struggling consumer electronics retailer dropped 11% to $3.83 on Wednesday, their lowest level since 1992. Circuit City (CC) chief Philip Schoonover said he will take a "cautious" stance on expenses in the first half of the year as consumers cut back on spending. Best Buy (BBY) chief Brad Anderson warned of a "tougher climate" on Tuesday at CES, but said, "... we don't see indicators to say that its likely to be a really difficult one."

4. Goldman cuts Motorola target. On heightened concerns of a U.S. recession, Goldman Sachs cut earnings estimates of auto and technology stocks. Motorola's (MOT) target share price was reduced to $18 from $20. On Monday, RBC downgraded MOT to "sector-perform" from "outperform" and lowered its target to $19/share from $21. With Motorola already trading at a two year-plus low, shares ended -0.4% to $14.79.

5. Hot item: digital TV converter vouchers. The National Telecommunications and Information Administration [NTIA] says requests for $40 coupons for digital TV converters have surged 62% to 1.38M in the past five days (note: each family is entitled to receive two coupons). The NTIA will start mailing the vouchers Feb. 17, when retailers are expected to have converters in stock. Analog TV broadcasts will end in Feb. 2009. Best Buy (BBY) chief Brad Anderson says the transition to digital is "one of the biggest risks our industry has," referring to the "tremendous" demand pressures expected.

6. Plasma's resurgence. A Reuters report effectively conveys the message not to count out plasma TVs, despite their increasing struggle against LCD TVs. Leading plasma TV makers Matsushita (MC), Samsung (see ETF EWY) and LG Electronics (see ETF EWY) are all seeking to expand market share and margins. Favorable developments: LCD supply crunch, emerging market demand and high-end niche demand (think premium features and triple-digit display size).