Lehman Brothers reiterates its underweight rating on Circuit City (CC).
Analyst Alan Rifkin while a 6% same store sales increase is a year-over-year improvement, the company was extremely promotional at the cost of margins. He notes promotions will continue through the holiday season. Rifkin says Circuit City shares currently trade at 20 times his 41 cents fiscal 2003 (Feb.) earnings per share estimate, and 18 times his 45 cents fiscal 2004 earnings per share estimate.
Relative to Best Buy shares, Circuit City's business trades at a 42% premium, which he believes is unwarranted. Rifkin continues to recommend investors switch out of Circuit City and into Best Buy.