Shares of Lexmark International Inc. took a hit Wednesday after a Morgan Stanley analyst cut her rating on the printer and copier maker, citing stiffer competition and the weakening euro.
THE SPARK: Analyst Katy L. Huberty downgraded Lexmark to "Underweight." She said rival Hewlett-Packard Co. will present a "formidable challenge" to Lexmark's ability to gain further market share in the laser printer market. She said Lexmark had benefited from component constraints that had plagued HP but are now easing.
The weak euro versus the dollar also could hurt Lexmark's earnings.
THE BIG PICTURE: The overall tech sector advanced Wednesday following much better-than-expected second-quarter results and a strong outlook from top chip maker Intel Corp.
THE ANALYSIS: But Huberty expects Lexmark's shares to underperform any short-term rebound in hardware shares.
"We see stiffer competition, weaker inventory growth and foreign currency headwinds for (Lexmark)," she wrote in a note to investors. "Long term, secular growth challenges remain for the industry due to mobile computing proliferation."
SHARE ACTION: Shares fell $1.86, or 5.3 percent, to $33.13 in midday trading. In the past 52 weeks, the stock has traded between $14.23 and $42.14.
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