4K Television sets are so 2014. That seems to be the message that US retailer Best Buy (NYSE:BBY) is grappling with on Monday after it was downgraded to “hold” by brokers at Jefferies.
Perhaps it is also an example of when a company name rings a little hollow. The stock was previously recommended as a “buy” by Jefferies.
“Our downgrade reflects concerns that a maturing 4K TV cycle will translate to softer comp sales and margins in this category for BBY,” explained Jefferies analyst Daniel Binder.
“ASPs for large screen 4K TVs have dropped another 30% on a TTM basis. BBY has above average 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,” he added.
Technicians define 4K as: a TV with a resolution of 3,840 x 2,160 pixels, more than 8 million pixels in total, which is four times the number in Full HD (1,920 x 1,080). Watching 4K TV at its best, you'll see everything on screen in crystal-clear clarity and sumptuous detail.
Some might say that if 4K television is the future, what is the risk of Best Buy stocking up in anticipation?
They were all the rage on main street in 2014. But in some ways the future isn’t here yet.
A lot of software like DVDs and Blu-Ray do not have the upscaled quality you need to appreciate them on a large 4K screen. Broadcasters have not yet switched to 4K either.
On top of that, by the time everyone has realised how close the future could become there is the obvious risk that 4K is overtaken by new screens with twice the pixel capacity, a kind of 8K TV.
Meanwhile, the price of these television sets is still considerable for household budgets still counting the overhang costs of recession, although cheaper brands have made inroads on price.
Best Buy’s stock was down 1% at $34.50 on Monday