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
- How To Not Succeed In Business Without Really Trying | Altucher Confidential
- When Blind Faith In Memes And Taglines Turn Dangerous | ZeroHedge
- Austrian Bad Bank "Black Swan" Bail-In Is Unconstitutional, Austria Declares | ZeroHedge
- Potential Runners | iBankCoin.com
- Busiest Day of Q2 Earnings Season | Financial Sense
- Biotech Slide Sends Nasdaq, Small Caps Reeling | ZeroHedge
- Meanwhile, In Ethiopia | ZeroHedge
The most relevant financial news and articles from the Internets
- Part of the Pentagon's email network was just... | Business Insider
- Australian humpback whale comeback a 'symbol of hope... | Business Insider
- Services sector activity picks up slightly in July | Business Insider
- Texas police officials are fighting an... | Business Insider
- What 12 highly successful people eat for breakfast | Business Insider
- The exec who launched Google+ admits it was 'confusing... | Business Insider
- A renewed sense of gloom has washed over the oil markets | Business Insider