Analyst Actions: Network Appliance, Tibco Software, Best Buy, Group 1

UBS FINANCIAL DOWNGRADES NETWORK APPLIANCE, IBM TO NEUTRAL FROM BUY

UBS Financial analyst Ben Reitzes says based on recent checks, he believes price targets need to be adjusted for prospects for slower hardware spending trends in 2008. He lowers targets for Sun Microsystems (JAVA), Dell (DELL), and EMC (EMC), given slower storage, server and PC spending in 2008 due to economic pressures.

For Network Appliance (NTAP) and IBM (IBM), while both are down significantly and recent quarters look fine, Reitzes downgrades the stocks to reflect his view that the shares could be range bound due to spending pressures long-term. For IBM, he notes hardware and services sales could be pressured as it has the largest financial services exposure in the sector.

Given the current uncertainty, he believes it’s prudent to stick with share gainer, buy rated Apple (AAPL), Hewlett-Packard (HPQ).

GOLDMAN DOWNGRADES TIBCO SOFTWARE TO SELL FROM NEUTRAL

Goldman Sachs analyst Derek Bingham says Tibco Software’s (TIBX) large deal sizes, high financial exposure heading into seasonally slower first half of calendar year 2008 heightens TIBX’s relative risk to the group; sees more challenging IT spending environment.

He thinks that, in tighter times, buyers tend to move away from expensive, best-of-breed offerings and toward “good enough” substitutes bundled with broader solutions from likes of IBM, Oracle (ORCL) and SAP (SAP).

Bingham sees $0.43 fiscal year 2008 [November] EPS, excluding ESOs, and $0.50 fiscal year 2009; below the Street’s $0.44 and $0.53 estimates. He says he does not see absolute downside form current levels, but expects limited upside relative to the broader software group, given TIBX’s positioning. He cuts $9 price target to $8.

BEAR STEARNS DOWNGRADES BEST BUY TO UNDERPERFORM FROM OUTPERFORM

Bear Stearns analyst Christopher Horvers says his downgrade of Best Buy (BBY) is based on slowdown in product cycle, discretionary nature of BBY’s products in light of macro considerations, and the stock’s relative valuation and performance.

Horvers says his research indicates sales growth at BBY demonstrates solid correlation to macro factors; he believes the sector is poorly positioned. He sees negative mix shift for electronics industry, with 60 basis points of gross margin pressure in calendar year 2008. He believes the cycle now favors discounters.

He thinks December-comps, expected Jan. 11, could be the last hurrah for the stock, as next catalyst is in April. He notes the shares are down only 3%, vs. average performance of his stocks under coverage are down 41%.

GOLDMAN DOWNGRADES GROUP 1 AUTOMOTIVE TO SELL FROM NEUTRAL

Analyst Matthew Fassler says he cuts estimates and price targets on his six full-line auto retailers — Asbury Automotive (ABG), AutoNation (AN), Group 1 Automotive (GPI), Lithia Motors (LAD), Penske Automotive Group (PAG), Sonic Automotive (SAH) — and downgrades Group 1 Automotive (GPI).

He cites sluggish sales reflected in December SAAR, but, more importantly, his expectation gross margin eroded through the fourth quarter, sales declines will continue in the first half 2008 as pressure on consumer spending persists, finally leads to more pressure on surprisingly resilient automotive segment. She says his sell on GPI reflects his estimates are further below consensus, firm’s recent checkered track record, trailing 12-month EBITDA margins well above trough levels.

Fassler cuts $3.90 2008 EPS estimate to $3.60, and $33 price target to $27.