Best Buy: Piper Downgrades on Weakening TV Prices

Piper Jaffray analyst Mitchell Kaiser this morning cut his rating on Best Buy (BBY) shares to Neutral from Buy, and chopped his price target on the stock to $49 from $54. “We are concerned about gross margin erosion in the home theater department as a result of what we expect will be significant flat panel TV price declines in the coming months,” Kaiser writes.

Kaiser says he is not making a negative call on Q2; in fact, he increased his estimate for the quarter to 59 cents, from 57 cents. But he writes that “channel checks … have revealed weak consumer demand for large flat panel TVs during the summer months and the early weeks of the important fall selling season.” He adds that the weak demand has created excess inventory “throughout the supply chain” that will likely have “negative gross margin implications” for the next two quarters. He trimmed his FY ’09 EPS estimate to $3.30 from $3.37.

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