Best Buy Co.’s stock slumped 5.8% in morning trade Friday, after Bank of America Merrill Lynch did an about-face and turned bearish on the consumer electronics retailer, citing concerns that sales will be weak over the second half of the year. Analyst Denise Chai downgraded the stock to the lowest underperform rating, after being at the highest buy rating for the last 18 months. She cut her stock price target to $32, which is about 3% below current levels, from $45. Chai said she is worried that same-store sales could turn lower through year end, given a mixed product cycle, and that the company’s continued reinvestment in the business is offsetting cost-cutting efforts. She also sees limited catalysts to boost valuation. “We believe [Best Buy] will continue to increase capital return and perform well relative to the industry, but if [second-half comparable-store sales] are negative, as we forecast, shares and the multiple are at risk,” Chai wrote in a note to clients. The stock has now lost 16% year to date, while the SPDR S&P Retail ETF has gained 5.5% and the S&P 500 has tacked on 3.1%.
Market Pulse Stories are Rapid-fire, short news bursts on stocks and markets as they move. Visit MarketWatch.com for more information on this news.
From:: Stock Market News