Shares of Best Buy Co., Inc. (NYSE:BBY) are down by nearly 7% this morning after Bank of America Merrill Lynch reversed its rating on the retailer to an ‘Underperform’ rating from a previous rating of ‘Buy’, a two notch downgrade. Furthermore, analyst Denise Chai tacked a price target of $32 per share on Best Buy’s stock, over 1% lower than it’s currently trading at, even factoring in today’s dip. The firm previously had a price target of $45 on the tsock. Chai, in her downgrade note, said that the second half of 2015 may be weak for Best Buy Co., Inc. (NYSE:BBY) as there is a possibility that same-store sales could decrease through the end of the year on the mixed product cycle ahead. Furthermore, she said that there are limited catalysts that may boost the stock price and that the firm’s reinvestment in its business is offsetting its efficiency efforts. Though Bank of America Merrill Lynch sees Best Buy continuing to increase capital return and performing well relative to the industry, Chai said that if second half comparable-store sales are negative, as they expect, the shares and multiple of the firm are “at risk”.
Hedge funds were also not confident in Best Buy Co., Inc. (NYSE:BBY) in the first quarter. By March 31, total holdings of those who were still long in Best Buy decreased by 13.15% compared to the previous quarter, to $888.29 million. Furthermore, heading into the second quarter, a total of 41 of the hedge funds tracked by Insider Monkey held long positions in this stock, down from 50 one quarter earlier. The smart money had already been proven right before the latest downgrade, as shares of Best Buy tumbled by over 13% in the second quarter.
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We also track insider transactions to give us an idea about the sentiment of insiders in their companies. Best Buy insiders have not bought any shares this year, but have sold some shares. Directors Hatim Tyabji and Kathy Higgins Victor and Large Shareholder Richard Schulze sold 11,250 shares each on April 6, April 8 and April 17, respectively.
Contemplating these moves, let’s review the newest hedge fund activity concerning Best Buy Co., Inc. on the next page.