Gadget Stock Watch: Best Buy Affirms Outlook, Analysts Mixed on RIM

1. Best Buy Dec. comps up; reaffirms outlook. Best Buy (BBY) reported Dec. same-store-sales rose 1.5%, in-line with internal expecations, but far from the 7% rate a year ago. The company attributed the decline to post-Thanksgiving week falling into fiscal Nov. instead of Dec. BBY affirmed its full-year EPS guidance of $3.10 to $3.20, on sales of $40B, compared to analyst estimates of $3.18/share on sales of $40.2B. BBY was off slightly in thin pre-market trading.

2. Love/hate of Garmin, RIM. Garmin (GRMN) (+2.7%, $78.00) and Research in Motion (RIMM) (+2.1%, $100.66) traded higher Thursday following upbeat analyst reports. Morgan Stanley upgraded GRMN to "equal-weight" from "underweight," saying not to short-sell at current levels. JP Morgan reiterated its "outperform" rating and $140/share target for GRMN and reiterated its "overweight" rating of RIMM, saying it doesn't see any justification for the recent selloff. Update: Early Friday, longtime RIM bull Peter Misek of Canaccord Adams cut RIM to "hold" from "buy" and lowered his target to $110/share from $145. RIMM was last down 2.7% to $97.90 in the pre-market.

3. GameStop stopped in its tracks. Shares of GameStop (GME) dropped 5.1% to $52.27 on Thurs., despite reporting 20% growth in comparable store sales for the nine-week holiday shopping season (ended 1/5) and raising EPS guidance to $1.09 to $1.10 (vs. expectations of $1.01) for the quarter ending 1/31. A case of "selling on the news" says one analyst. However, Michael Pachter of Wedbush Morgan downgraded GME to "hold" from "buy," citing valuation concerns: "...we believe that investors are no longer willing to pay premium multiples for growth."

4. The bull case for LG.Philips LCD. Analysts see a buying opportunity in shares of South Korea-based LG.Philips LCD (LPL). Recent share price weakness, as well as improving operations, growing demand for bigger displays on devices and TVs, plus the Beijing Summer Olympics, are among reasons to be optimistic.

5. Logitech jumps on rumor of buyout. PC peripheral maker Logitech (LOGI) jumped 6.5% (+11% intra-day) to $33.07, recouping some of its 16% drop since the end of '07, on rumors of an $8B takeover by Microsoft (MSFT). At this point, analysts are skeptical of a takeover, but the rumor seems to have scared short sellers. LOGI is trading to the downside by 3.1% in early afternoon activity in Europe.

6. Tech stock blues. The Nasdaq gained 0.6% on Thurs., but is still down >5% for the year and off more than the DJIA and S&P 500. Some are surprised given the rate of expected growth for Q4 earnings, but it's the growing likelihood of a recession that is curbing enthusiasm. APPL, GOOG, AMZN and RIMM accounted for >60% of the Nasdaq's 10% gain in 2007 and 15% of the decline ytd 2008. This is tech's worst 8-day stretch since 2002, but there have been 49 other eight-day declines of this extent since 1989. [WSJ]

7. Verizon says not impacted by economy. Verizon (VZ) President and COO Dennis Strigl: "We've seen virtually no economic impact. I don't see it. Total access lines are fine." However, comments by rival AT&T (T) earlier in the week, conveyed a different message, noting an increase in "nonpay disconnects." Shares of VZ gained 2.3% to $43.45, while AT&T rose 1% to $39.40.

8. Porn industry's take on DVD battle. Leading adult film companies discussed the ongoing next-gen DVD format battle at an industry conference. While at first wary of the Sony-backed (SNE) Blu-ray's higher prices, executives seem more interested following recent news of Warner Bros. (TWX) decision to solely distribute on Blu-ray. Executives say consumers, not the industry (remember VHS vs. Betamax), will decide the winner of the battle, influenced ultimately by pricing and content availability.

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