Stock Picks: NWY Up, INTC Down

An optimistic view of the fourth quarter sent shares of New York & Company (NWY) up more than 14% this morning despite worse-than-expected third-quarter earnings.

The women’s apparel chain reported a third-quarter loss of 11 cents per share, down from a loss of 10 cents a share in the year-ago period, and missing analysts’ expectations of an eight-cent loss. Comparable same-store sales for the quarter were down 8.4% over the previous year.

New York and Company CEO Richard Crystal said the firm saw sequential improvement in the third quarter. He pointed to a “turnaround” beginning in October and November that should allow the firm to return to profitability in the fourth quarter and come close to breaking even for the second half of the year.

The chain’s core consumer -- a 27- to 40-year-old woman who makes $50,000 to $75,000 a year and has at least one child-- has been hit hard by the recession, says Eric Beder, an analyst with Brean Murray, Carriet & Company. “The stores are looking as good as they’ve looked in years, but they just haven’t been able to increase the traffic,” Beder says. Same-store sales for the holiday quarter will likely still be down 5% over last year, but the company could make a profit if October’s improving trends continue, he says.

The bottom line: “I’m not sure we’re going to break out the Champagne yet, but it’s definitely a nice start for them,” Beder says.

A semiconductor sector downgrade from Bank of America Merrill Lynch sent shares of Intel (INTC) down more than 5% in morning trading.

Bank of America downgraded Intel to Neutral and cut its 2010 growth estimate for the sector, noting that inventory levels may have rebounded too far. “About time they caught up with my views,” says Daniel Berenbaum, an analyst with Auriga USA. Higher than normal seasonal strength in the third quarter suggests that the first half of 2010 could be weaker than typical for the season, Berenbaum says. “I think we’re pulling demand forward,” he says.

Consumers’ recent shift toward lower-priced products like netbooks also suggests prices could decline throughout the tech sector, Berenbaum says.

Others believe that renewed business IT spending in 2010 will drive growth for Intel and its competitors. It’s still too early to tell how strong corporate upgrade spending will be next year, says Hendi Susanto, an analyst with Gabelli & Company. Demand for lower-cost products like netbooks in emerging markets could also drive growth, Susanto says.

The bottom line: It may be too soon to tell how 2010 will look, but there’s cause for concern that the sector could see a setback.