Back to top

Analyst Blog

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext.  9339.

We recently downgraded our recommendation on Best Buy Company Inc. (BBY - Analyst Report), the beleaguered consumer electronic retailer, to Underperform with a price target of $16.00, following its dismal second-quarter 2013 results. Earlier, we had a Neutral view on the stock.

Best Buy posted weaker-than-expected second-quarter results. The quarterly earnings of 20 cents a share fell sharply by 49% from 39 cents reported in the year-ago quarter, missing the Zacks Consensus Estimate of 31 cents.

Thus, this slide challenges Hubert Joly, the newly appointed Chief Executive Officer, with the Herculean task of completely revamping the operations. Best Buy also suspended its future share buyback program and is abstaining from providing earnings projection for fiscal 2013 due to the uncertain environment related to product launches and industry wide sales.

On the other hand, we believe that the company’s disappointing results may strengthen the position of Richard Schulze, the former Chairman and founder of Best Buy, who has been advocating a buyout proposal.

Best Buy’s total revenue dropped 2.8% year-over-year to $10,547 million, and also fell short of the Zacks Consensus Estimate of $10,634 million. Comparable-store sales declined 3.2% during the quarter. The company has long been struggling with dwindling sales in key categories including televisions, notebooks, digital imaging and gaming devices, which in turn, is taking a toll on the company's same-store sales results.

Moreover, heightened competition from online retailers like Amazon.com Inc. (AMZN - Analyst Report), is adversely affecting its sales and profitability as the online retailers are gradually encompassing new merchandise categories under their purview and offering huge discounts on products with free shipping services to attract customers.

Soft domestic and international sales performance that weighed upon the company’s results, kept analysts on the back foot. Additionally, analysts remained concerned about the tough economic environment in Europe and China and weak sales in Canada.

Moreover, secular headwinds and falling comps compelled analysts to lower their estimates. Further, Best Buy’s cash position plunged 67.3% at the end of the quarter, which is of grave concern.           

The above analysis supports our unbiased view, and advocates our bearish opinion on the stock.

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

Learn more

Start for as little as $4.50 per trade.

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
KNIGHTSBRIDG VLCCF 13.95 +11.24%
QUESTCOR PHA QCOR 82.95 +3.60%
BIO PATH HOL BPTH 2.69 +3.46%
E*TRADE FINA ETFC 22.08 +2.70%
LAKE SHORE G LSG 0.79 +2.46%