SiRF Tech (Nasdaq:SIRF) was downgraded this morning at Morgan Stanley. The analyst thinks that the company could experience decelerating growth in 2006, which would hurt the stock due to its rich valuation.

He also thinks that the company will ramp its investments in handsets, autos, notebook PCs, gaming, and digital cameras. The increased investments could limit upside to EPS, with the payoff not beginning until 2007. He is not predicting a bad year for SIRF in 2006, but just one that may not live up to lofty investor expectations.

I am not sure that I fully agree with the analyst, as I think the strength of the PND market and at companies like GRMN remain strong. I do agree that expectations are lofty though.

The stock has gapped down roughly -5% today, on rising volume. But the stock is still above its 50-day ma. I have been looking for SIRF to make new highs here, but if it breaks down further, I may consider stepping aside and watching for a deeper correction.

long SIRF