The growing competition faced by electronic retailer Best Buy (NYSE:BBY) has resulted in Citigroup (NYSE:C) downgrading the stock, even has Best Buy gave weak guidance.
Citigroup analyst Kate McShane said, "Mounting pressure from alternative channels will likely continue to pressure pricing. Critically, BBY is struggling to retain market share gains experienced after the bankruptcy of Circuit City, as other retail channels have stepped up CE product assortments and pricing. In particular, significant pressure has come from mass discounters and online retailers given favorable positioning in a commoditizing product channel. Mass discounters are able to capture a greater share of product categories by competing on price, as well as convenience for share of wallet. Furthermore, we have noted a significant increase in the depth & breadth of CE products offered in mass merchant channels, as well as an increased ability to stock new product on shelves earlier in the lifecycle of new technologies (erasing BBY’s relative technological merchandising edge)."
McShane lowered her rating on the stock from "Hold" to "Sell," while slashing her price target to $27 from a prior $36, after the weak outlook for the year.
Best Buy was trading at $28.92, falling $1.21, or 4.02 percent, as of 12:19 PM EDT.
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