What happened

Shares of consumer electronics superstore Best Buy (NYSE:BBY) sank 6% in early trading Monday, before clawing their way back to a 2.4% loss as of 11:50 a.m. EST. You can blame Bank of America Merrill Lynch (BAML) for that.

Citing fears of a slowdown in the retail industry, the bank cut its rating on Best Buy stock this morning from neutral to underperform, and cut its price target from $70 to $50 -- $4 below where it trades today.

Cartoon bull facing cartoon bear under green and red stock arrows

Now here's a puzzler. Wall Street is bullish, but Best Buy is bearish about its earnings in Q4. Image source: Getty Images.

So what

Why is BAML panning Best Buy? Citing strong performance over the past year (earnings up 25% year over year for the first three quarters of fiscal 2019), it warns  that Best Buy is going to be hard-pressed to repeat this feat, and will face tough comparisons. In particular, the analyst sees weak sales in televisions, Apple products, and gaming dragging down Best Buy's results, potentially leading to weaker than expected same-store sales as early as this year's fiscal fourth quarter.

Now what

Analysts are forecasting that Best Buy will earn $2.57 per share, pro forma, on sales of $12.7 billion this quarter. BAML thinks those estimates are too high. Crucially, Best Buy itself warned in last month's earnings report that Q4 sales will probably be only about $12.6 billion, and Q4 earnings will be just $2.53 at the midpoint of its guidance range.

Given that Best Buy doesn't believe it will earn what Wall Street believes it will earn, it's entirely possible that BAML is right, and Best Buy will miss earnings in Q4 -- and for the year.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.