Dolby gets Hammered (DLB)
Just a week after Dolby Labs (NYSE:DLB) scored an upgrade to Market Outperform by Avondale and an outright Buy from Deutsche Bank, Goldman Sachs (NYSE:GS) has downgraded the stock to a Sell.
Goldman expects Dolby to beat Q4 FY 2010 estimates, as well as expecting future guidance to be the key focus. FY2011 guidance is expected to be conservative and is unlikely to include consensus within its range. Historically Dolby has been a beat and rise stock and estimates have been materially above consensus.
Mastery Sponsors - Become one Today
Goldman Sachs analyst Ingrid Chung cut her rating on the stock to “Sell” from “Neutral” and cut her price target to $50 from $72, writing that the company’s Q4 report will be a peak for the company’s financials.
The main part of the thesis is that online video consumption and tablet computers are going to see increasing adoption, which will drive down the need for DVD players and the optical drives in PCs, thus reducing demand for the company’s codecs in those devices. Revenue coming from tablet products such as Apple’s (AAPL) iPad is lower than for traditional PCs and DVD players, Chung writes.
Dolby gets less than 25 cents per tablet computer for its claim to AAC encoding royalties versus $1 to $2 per notebook computer, she observes.
Bottom Line: Fellow Stock Masters, I for one am having a hard time buying into the analysis over at Goldman Sachs. Perhaps their downgrade is a ploy to get in on the stock for cheap? I'm going to have to go with Deutsche Bank analyst Brian Thackray, who recently raised his rating on the stock to Buy from Hold, with a new target of $75, up from $70.
The analyst notes that the stock is down 13% since July, due in part to concerns of slowing TV and PC sales. But he thinks that those issues should be offset by adoption of Windows 7 in the PC market and growth in the China TV sector. “The bottom-line is that Dolby has exceeded expectations for over 4 straight years and every once in a while, a buying opportunity exists,” he writes. “We think this is one of them and that growth remains robust.”
Best of the Blogs
Scanning and identifying the best blog entries every hour
- STTG Market Recap November 21, 2014 | FundMyMutualFund
- No One Told You When To Run, You Missed The Starting Gun | ZeroHedge
- Trade Ideas For Friday | iBankCoin.com
- The Unfolding Economic Crisis in Europe | Financial Sense
- THe PeoPLe'S KeYNe'S... | ZeroHedge
- More Good News for Employment | Financial Sense
- THE BEARS WIN | iBankCoin.com
The most relevant financial news and articles from the Internets
- If You're a Baby Boomer, Here Are the 12 Worst Cities to Retire | TheStreet.com
- Ferguson on edge ahead of grand jury decision | Business Insider
- Jim Cramer on His Dad: 'Our Last Day Together Was Our Best One' | TheStreet.com
- 25 Ways to Make LinkedIn Work for You | BusinessWeek
- Former ZocDoc Employee Says She Is Suing The Company Following Sexual Harassment | Business Insider
- The Sun Asked People To Fly The Flag For #WhiteVanGate ... And Twitter Responded In... | Business Insider
- Here's Everything Google Knows About You | Business Insider