Best Buy’s (BBY) shares fell about 3% on Monday afternoon as Goldman Sachs (GS) delivered a double downgrade on the consumer electronics and home appliances retailer. The banking giant’s analyst, Kate McShane, shifted her stance from Buy to Sell, citing pressure on the retailer’s margins.
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GS Warns Rising Chip Costs May Hit Best Buy
McShane slashed her BBY price target by 22%, from $76 to $59, suggesting about 5% downside risk from the stock’s closing price of $62.37 on Friday. The four-star analyst contended that the retailer’s sales after its first quarter — which is expected to end in early May — are likely to suffer from the impact of soaring memory-chip prices.
According to the Goldman Sachs analyst, these surging prices are likely to be reflected in the prices of laptops and computers, forcing consumers to opt for lower-priced devices that are less profitable for the retailer. In addition, manufacturers are likely to produce and ship a smaller amount of these products, also constrained by the cost situation.
Moreover, McShane noted that significantly boosting sales across its appliance and consumer electronics categories remains a big challenge for Best Buy. Her comment comes as the PC market is bracing for the sharpest fall in device shipments in more than a decade.
Best Buy Braces for Tepid Sales in Fiscal 2027
Already, the Minnesota-based retailer has projected below-consensus sales of between $41.2 billion and $42.1 billion for fiscal 2027, even as CEO Corie Barry recently noted that checks show the company’s market share “was at least flat.”
Best Buy saw its comparable sales fall by 0.85 year-over-year during its fourth quarter that ended on January 31. The retailer has struggled to return to levels of sales seen in 2020 and 2021.
Is Best Buy Stock a Good Buy Now?
Across Wall Street, analysts have improved their consensus rating on Best Buy’s shares from Hold in early March to Moderate Buy. This breaks down to five Buys, eight Holds, and one Sell issued by 14 analysts over the past three months.
In addition, the average BBY price target of $73.79 implies more than 21% upside.
