Merriman Curhan Ford & Co. analyst David Duley downgraded Zoran stock to "Neutral" from "Buy," citing expected weak holiday spending and a dimmer outlook from such competitors as Genesis, Trident and Mediatek Inc.

"We believe Zoran has excellent technology and is a well-run company, but at $25, we believe it is close to fully valued," Duley said in a client note.

While third-quarter results exceeded analysts' forecasts, a slowdown in the U.S. economy may hinder sales of digital TVs, cameras and other devices containing Zoran's chips, he said.

Mediatek, one of Zoran's rivals, recently guided to a lower fourth quarter, and sales at its consumer electronics line are forecast to drop 15 percent, Duley said.

Shares of Zoran, which have gained 83 percent since January, lost 56 cents, or 2.3 percent, to $24.29 after Monday's opening bell.