Best Buy’s Shares Slide on Piper Jaffray Downgrade

Piper Jaffray analyst Peter Keith assumed coverage of Best Buy's stock and cut his firm's rating of Best Buy to "neutral" from "overweight," according to a report by Forbes

Best Buy's shares were trading down more than 3.5 percent on Tuesday afternoon to $23.21 after an analyst reportedly cut his firm's rating of the Richfield-based electronics retailer's stock.

Peter Keith, an analyst at Minneapolis-based Piper Jaffray, assumed coverage of the stock and cut his firm's rating of Best Buy to “neutral” from “overweight,” according to a report by Forbes.

The analyst announced a new price target for the stock of $26, down from $39, Forbes reported. The stock closed on Friday at $24.10.

In a research note, Keith reportedly wrote the following: “While valuation is intriguing at current levels, we believe [Best Buy]'s earnings multiple will remain depressed given its unfavorable positioning in the current consumer electronics industry product cycles and its declining [return on invested capital] trend. Returning cash to shareholders and international growth are two positives of note, but we would not expect [Best Buy] shares to be rewarded on these initiatives until the company can demonstrate sustainable operating margin expansion.”

For the quarter that ended on May 28, Best Buy reported net income of $136 million on revenue of $10.9 billion-representing a 12 percent drop and a 1 percent gain, respectively. Same-store sales, meanwhile, slid 1.7 percent compared to the same period a year ago.

To learn more about Piper Jaffray's downgrade of Best Buy's shares, read the full Forbes story here.