By Senad Karaahmetovic
Shares of Best Buy (NYSE:BBY) are trading about 2% lower at the New York open after Bank of America analysts slashed the rating to Underperform from Neutral, citing a "challenging environment."
The new price target of $69 per share (lowered from $80) implies a downside risk of about 17% relative to yesterday's closing price. The slashed price target reflects lowered estimates, which mirror a challenging medium-term demand environment.
"With few positive catalysts for BBY shares in the next 12 months, we see relative upside to stocks in our coverage that have a more favorable macrocycle (such as auto aftermarket companies), a store expansion story (growth companies with white space), and/or that sell non-discretionary product categories (such as pet food & supplies)," the analysts told clients in a note.
The analysts is increasingly cautious about the near-term prospects for Best Buy as the ongoing holiday season in the U.S. is "not shaping up to be strong." Bank of America's analysts are seeing "tepid" spending trends, based on the analysts of aggregated credit and debit card data.
"We expect 2023 to be another year where consumer spending gets prioritized toward "needs" (food, fuel, maintenance & repair categories) and away from "wants." Our recent Home Work survey run in early Dec '22 showed that survey respondents intend to spend less over the next 12 months in the CE category," they added.
Best Buy stock is down 17.2% year-to-date.