Best Buy's Stock Slips After J.P Morgan Cuts Rating, Price Target

Best Buy Co.'s stock dropped 1.3% in premarket trade Friday, after J.P. Morgan downgraded the consumer electronics retailer, citing concerns over the sales outlook for the second half of the year and valuation. Analyst Christopher Horvers lowered his rating to neutral, after being at overweight since March 2013, and cut his year-end stock price target to $40 from $45. "First, we believe a slow start to the year for sales is likely to raise uncertainty on lapping stronger sales in the backhalf...and this is likely to keep a lid on the stock's valuation until there is greater clarity given 4Q is 57% of earnings," Horvers wrote in a note to clients. "Finally, with retail being widely owned on a lower-gas-price-lifting-spending thesis...we believe it is sensible to take a more neutral stance on Best Buy, one of our most volatile stocks under coverage." The stock has run up 26% year to date through Thursday, compared with a 5% advance in the SPDR S&P Retail ETF and a 2.6% gain in the S&P 500 .