BUY OR SELL-Can Portugal top gainer Sonae rise even higher?

* Shares double in price this year, lead Portuguese market

* Some market participants see the rally continuing

* Others say positive news likely priced in

By Andrei Khalip

LISBON, Aug 24 (Reuters) - The stock price of Portugal's retail-heavy Sonae conglomerate (YSO.LS) has more than doubled this year, leading the local market.

Portugal's modest economic uptick in the second quarter [ID:nLD441862] and slower real estate depreciation have helped the shares of the country's main employer and analysts expect it to report a more than 6 percent rise in second-quarter sales on Tuesday.

Will this drive the shares even higher, or will investors take profits?

FURTHER TO GO

"We think Sonae has somewhat more to give in terms of its valuation," said Banco Popular fund manager Bernardo Moniz.

He said his fund is holding on to the stock, which last year saw about 75 percent of its value wiped out by the global crisis and, before that, a failed takeover bid by its telecom unit Sonaecom (SNC.LS) for Portugal Telecom (PTC.LS).

"Sonae will probably even beat market consensus with the results. The retail sector has been doing quite well, the group's overall setting has improved, but we have to see how Sonae stock behaves around 1 euro ... We think the 1 euro mark will really test this rally," he added.

That view means a 10 percent upside potential for Sonae, which on Monday hit a 14-month high of 0.91 euros before retreating to 0.88 euros -- a 0.7 percent decline on the day.

The stock is up roughly 105 percent since the start of this year and 22 percent higher so far this month, being now at June 2008 levels before the global crisis kicked into high gear around September last year.

It spiked 8 percent last Thursday alone on a few sizeable buy orders and then easily sustained that rise on Friday.

By comparison, Lisbon's PSI20 .PSI20 index has gained 24 percent since January and the DJ Stoxx European retail index .SXRP has gained around 26 percent.

ALL GOOD NEWS PRICED IN?

Still, some analysts say investors have likely priced in all possible positive news for the company, the sector and Portugal, so the stock may have peaked for now.

"Our official recommendation is buy, but at 0.9 euros, which means that it is no longer that interesting and that the upside we saw months ago has probably fizzled out," said Pedro Morais, an analyst with Espirito Santo Equity Research in Lisbon.

"There is still an important trend for non-food retail recovery to confirm when they release their results tomorrow, but the share has risen a lot and we think it's all priced in already," he added.

While Sonae's main business of supermarkets-led food retail accounts for more than a half of the group's revenues, it also runs domestic appliance, sporting goods and other megastore chains, has a telecommunications division and an international shopping mall development and management business.

The latter has weighed on Sonae's overall results during the crisis due to plunging property values, but the division's latest data showed an easing pace of deceleration.

"If that hasn't bottomed out, it is close to the bottom. The economy is giving signs of improvement, but then there is a negative of the unemployment rate that is likely to keep rising for some time even as GDP starts to grow," Morais said.

Unemployment is particularly hard on sales of durable goods like domestic appliances and computers, which Sonae sells.