Best Buy's Stock Slumps After Analyst Cuts Rating, Price Target

Shares of Best Buy Co. Inc. dropped 1% in afternoon trade Monday, despite the broad gains seen in the retail sector and the overall stock market, after Jefferies downgraded the consumer electronics retailer on concerns over a weakening 4K TV market. Analyst Daniel Binder cut his rating to hold, after being at buy for at least the last three years. He trimmed his stock price target to $36, which is just 4.3% above current levels, from $39. Binder said he is worried that the 4K TV cycle is maturing as prices fall and competition increases. He said the average selling prices for large screen 4K TVs have dropped 30% on a trailing-12-month basis, and Wal-Mart Stores Inc. and Target Corp. [: tgt] have "dramatically increased" their product offerings. Wal-Mart increased its shop-keeping-unit (SKU) count on 4K TVs to 9 from a few, while Target has tripled its SKU count to 15 from 5, Binder said. "[Best Buy] has above average market share in 4K TV, but will face stiffer competition this holiday season," Binder wrote in a note to clients. He believes the commoditization of 4K TVs puts same-store sales growth at risk for the rest of the year. Best Buy's stock has soared 13% year to date, while the SPDR S&P Retail ETF has climbed 6.3% and the S&P 500 has run up 7.3%.