Goldman Sachs Downgrades Best Buy (BBY) to Neutral Pt $28
Goldman Sachs downgraded Best Buy (NYSE: BBY) from Buy to Neutral with a price target of $28.00 (from $45.00). Analyst Matthew J. Fassler thinks it will now trade as a "secularly challenged retailer."
"While BBY's 4Q pre-announcement lowered expectations and valuation, three forward-looking factors lead us to a more guarded view of the business and a more balanced view of risk/reward. (1) Cracks in BBY's wireless momentum. (2) The lapping of the addition of the Vizio TV product in 1H14. (3) The conundrum of trying to accelerate cost cuts while investing in superior customer experiences," said Fassler.
"We now expect BBY to trade at multiples characteristic of secularly challenged retailers, after having broken that mold for a time in 2H2013, given the challenging realities of selling big-ticket commodities in a price transparent environment, hammered home by its 4Q showing. The likely diminished contribution of highly profitable wireless growth and the cycling of Vizio as a key driver of TV share gains impair our confidence as we look forward. Management spoke to incremental cost cutting opportunities on its call, but we think the firm will be challenged to deliver superior customer experiences while slashing its cost structure," he added.