Analyst Says Dolby Labs at Fair Value; Stock Sinks

Shares of Dolby Laboratories Inc. dropped Wednesday after an analyst said the audio technology maker's outlook for 2010 implies recovery in consumer spending might take longer than expected.

San Francisco-based Dolby's stock sank $2.86, or 6.5 percent, to $42.32 in afternoon trading.

On Tuesday, Dolby beat Wall Street's expectations for its fiscal fourth quarter, which ended in September. But the company's outlook for fiscal 2010 came in lower than analysts had predicted.

Dolby's guidance "suggests that signs of a full-cycle recovery in consumer spending may potentially be delayed," wrote Canaccord Adams analyst Jeff Rath in a research note Wednesday. Until that spending picks back up, Dolby's shares are at a fair value, Rath wrote.

The analyst downgraded Dolby's stock to "Hold" from "Buy" and cut his price target to $44 from $46.

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