Analyst Picks and Pans: Nokia, Best Buy, Zions Bancorp

Nokia (NOK) Baird downgrades from outperform to neutral

Nokia Corp.'s new phones look good, but the world's No. 1 cell phone maker is still likely to lose market share, said Robert W. Baird & Co. analyst William Power, who downgraded the company's stock Friday morning.

Power cited a recent rally in the shares -- they've gained $3 in three weeks -- as part of the reason for the cut from outperform to neutral. The risk-to-reward ratio is now "fairly balanced," he wrote in a research report. He kept a $15 target price.

New devices revealed at the Nokia World show hold promise, Power wrote, but competition is fierce, with LG Electronics Inc. and Samsung Electronics Co. taking share in mid-range cell phones and Apple (AAPL) and Research In Motion (RIMM) doing the same in smart phones.

Meanwhile, network investment by carriers remains "muted," affecting Nokia's infrastructure joint venture with Siemens AG, Power wrote.

Best Buy (BBY) Oppenheimer downgrades to perform from outperform

Oppenheimer analyst Brian Nagel said Best Buy shares are trading near the top of their 52-week range, so he downgraded the stock to perform from outperform based on valuation and the potential for continued weak sales.

The electronics retailer has been able to win over customers left stranded when Circuit City closed, but it has still felt the effect of consumers cutting back amid the recession. Best Buy's revenue rose 12% in its fiscal first quarter, but its profit fell 15% from a year earlier.

Nagel said in a note Friday that, while he expects results to improve at Best Buy through the end of the fiscal year, investors have been too quick to dismiss the possibility of weak sales in the fiscal second quarter, which Best Buy reports Tuesday.

In fact, the Richfield, Minn.-based company's shares have risen 23% since the beginning of July and closed Thursday at $41.05, closer to the top end of the stock's 52-week range between $16.42 and $48.99.

"Rising market expectations leave little room for additional upside to forecasts in the third and fourth quarter," Nagel wrote. "Best Buy's second-quarter report next Tuesday is not likely to represent a positive catalyst for shares."

Zions Bancorp (ZION) Fox-Pitt Kelton downgrades to in line from outperform

Zions Bancorp is going to have to increase its reserve against loan losses, and will have to raise between $500 million and $800 million in equity capital, causing dilution, said Fox-Pitt Kelton, downgrading the bank's shares.

"We expect credit pressure to remain a severe earnings drag at Zions in coming quarters, particularly as the bank continues to work through real estate-related issues in highly challenged markets," wrote analyst John Pancari in a note Friday. He said non-performing assets -- which are loans that a borrower has stopped paying down for an extended period -- are going to keep rising, peaking at about 6.6% in 2010. Zions has realized only 25% of $3.7 billion in projected cumulative losses, he said, and is going to have to build up its loan loss reserves.

Due to loan losses and write-downs of certain securities portfolios, Pancari foresees capital shortfalls and regulatory scrutiny of tangible common equity levels, or how much in losses a bank can take before shareholders' equity is wiped out. He thinks that Zions is going to have to raise between $500 million and $800 million in equity capital. That will dilute current stockholders' value and could depress shares, he said.

Pancari deepened his loss estimate for the year to $8.59 per share from a per-share loss of $7.36; analysts polled by Thomson Reuters see a loss of $9.52 per share in 2009.

He also set a price target of $15 on Zions shares, which implies downside of 5.9% from its closing price Thursday.

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