Best Buy Co Inc (NYSE:BBY) has fared better than many retailers at fending off competition from the likes of Amazon.com, Inc. (NASDAQ:AMZN) and other online shops. But despite its best efforts, the changing landscape of retail and competition relegate BBY to little more than a glorified showroom.
People in the market for a 4K television could find plentiful options at Best Buy compared to other retailers. But as Jefferies analyst Dan Binder notes today in commentary on BBY stock, that’s not going to be the case much longer:
“Average selling prices for large screen 4K TVs have dropped another 30% on a trailing 12-month basis and Walmart and Target have dramatically increased their stock keeping unit (SKUs) counts in 4K TVs vs. last year.”
In response, the research firm lowered its price target on BBY stock to $36 from $39 and from “buy” to “hold.”
Best Buy offers about 160 4K TV options online and off; Walmart offers up to 59 4K televisions, and Target boasts 44. Yes, the general big-box competitors are behind Best Buy, but that’s still enough options for the average no-frills consumer. And there’s more from Binder:
“BBY has above avg. market share in 4K TV, but will face stiffer competition this holiday season. The commoditization of this technology could put 2H comp sales at risk for BBY.”
Obviously, this isn’t the best news for BBY stock holders, as Best Buy derives roughly a third of its revenues in the U.S. from consumer electronics, led by big-screen TVs. Increased competition from these mass-market retailers and declining prices will assuredly cut into Best Buy’s top line ahead of the vital holiday shopping season.
That said, BBY is trading flatly on Monday, so if there’s a harsh reaction to come, it’s not there yet. It could mean investors were pricing in an eventual decline in TV sales, or that general negativity was simply already baked in.
As of this writing, John Kilhefner did not hold a position in any of the aforementioned securities.
