The JB Hi-Fi Limited (ASX: JBH) share price has started the week poorly.
In late trade, the retail giant's shares are down 1.5% to $54.00.
Why is the JB Hi-Fi share price falling?
The catalyst for the weakness in the JB Hi-Fi share price on Monday appears to have been a broker note out of Goldman Sachs.
According to the note, the broker has downgraded the retailer's shares to a sell rating and slashed its price target by 25% to $39.00.
This suggests there's potential downside of almost 28% for the JB Hi-Fi share price over the next 12 months.
What did the broker say?
Goldman made the move on the belief that the tide is beginning to turn for JB Hi-Fi after a couple of very positive years.
This is due to rising competition from pureplay online retailers such as Amazon and Kogan.com Ltd (ASX: KGN), the back-to-work trend, supply chain disruptions, and the softening housing market.
The broker explained:
"Over the last 2 years, JBH has enjoyed confluence of growth factors with COVID spurred work from home, positive housing cycle growth with low interest rates, high demand with low supply with benign competition leading to lower promotions and relatively stable COGS.
However, we see this reversing – global commodity inflation and supply chain disruptions out of China (due to COVID) providing further cost and supply pressure.
At the same time, Australia is increasingly seeing back-to-work trends (partially) and the higher interest rates are likely to put pressure on housing cycle. Intensifying competition from the likes of Amazon and Kogan (online pure-plays) will likely result in some price competition, in our opinion."
All in all, Goldman believes this means the JB Hi-Fi share price is overvalued at the current level.
