Those who bet electronics retailer
would continue to rally as interest rates fell got burned Friday.
Shares in the company were down nearly 10% following a bearish report from
analyst Alan Rifkin, who urged investors to steer clear amid valuation concerns and falling sales. Rifkin, whose 2001 earnings estimate of 70 cents a share is well below the
consensus of 93 cents, said the retailer's January same-store sales, which track sales at stores open at least a year, likely fell between 5% and 6%. Circuit City didn't immediately comment. (Rifkin has a market perform rating on the stock, and his firm hasn't underwritten for Circuit City.)
Shares were lately trading at $16.99, down $1.86, or 9.9%. Circuit City shares are well below their 52-week high of $65.19, but have rallied since dipping below $10 in late December.
In addition, Rifkin says Circuit City shares are expensive relative to two of its main competitors,
. Based on his estimates, Circuit City trades at around a 17% premium to Best Buy, and 13% to RadioShack -- premiums, he says, that aren't warranted. Best Buy shares also lost ground Friday, down $2.08, or 4.3%, while Radio Shack was recently at $54.91, down 28 cents.
Other analysts are similarly bearish. Peter Benedict, an analyst at
CIBC World Markets
, has a hold on Circuit City. "It has a lot of challenges ahead," he says. (His firm does not do underwriting for Circuit City.)
Among those challenges are the slowing economy and the company's efforts to remodel many of its stores -- a plan Circuit City has scaled back in the face of the poor retail environment.
Circuit City's plunge comes on the heels of a Tuesday
Deutsche Banc Alex. Brown
report that showed electronics retailers are historically among the top-performing groups following a second interest-rate cut. (The
cut rates by a half percentage point Wednesday, and did the same Jan. 3.)