Demand for digital cameras – including
SLRs and lenses - has fallen off a cliff
􀀗 But share prices have rallied. Camera
makers now look overvalued
􀀗 Cutting Nikon and Canon to UW(V),
from N(V). Remain UW(V) on Olympus
Recession and the strong yen have taken a severe toll on
Japanese digital camera makers, with CIPA data through
February showing unprecedented declines in unit demand
and pricing for cameras with built-in lenses, SLR cameras
and interchangeable lenses.
Meanwhile, camera makers’ share prices have rallied. In our
estimation, Nikon is now overvalued by 21%, Canon by
23% and Olympus by 39%. Potential catalysts for a retreat
include red ink in the March and June quarters and continued
reports of weak demand for digital cameras and other
products made by these companies.
Despite the collapse of sales in recent months, CIPA is
forecasting essentially flat digital camera unit shipments. We
are forecasting a 19% decline this year, followed by
increases of 3% in 2010 and 11% in 2011. Shipment value is
likely to be down 40% this year, in our estimation.
Downgrading Nikon and Canon to Underweight (V), from
Neutral (V), with potential downside of 21% and 23%,
respectively. Remain Underweight (V) on Olympus, with
potential downside of 39%. Remain Neutral (V) on Tamron,
with potential upside of 6%.