Goldman is reinstating coverage on Best Buy (BBY) at SELL. The US consumer, Goldman says, isn’t quite ready to pour its money into electronics. The bank however is leaving about 10% wiggle room on the upside for BBY so it can have its cake and eat it too:
We are removing the NR designation on BBY and have a Sell rating with a $42 12 month price target. This is more of a sector-relative call than an absolute call; we see modest upside to our 12-month price target, but less than for most other names in our sector.
Goldman sees “several risks” converging to threaten the long-term earnings outlook off a high EBIT margin base:
- TV passing the sweet spot on the profit curve, with growing mass market competition;
- fading tax rebate benefits
- cycling of benefits from BBY’ s consumer credit deal
- the challenge of executing on BBY’s multiple regional growth platforms.
If Goldman wants you to sell BBY, a stock it sees 10% upside to, it must really think retail is screwed.
Goldman reinstates Best Buy (BBY) with SELL, target price $42.
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