It’s Time To Buy Best Buy

Shares of Best Buy (BBY) got whacked today as the nation’s largest specialty electronics retailer saw its sales come in much lighter than expected. The stock was down over 15% today and was trading as low as $35.33 in extended hours trading.

The company missed earnings expectations big time with just $11.89 billion dollars in revenue. Wall Street was looking for $12.47 billion dollars.  EPS came in at 54 cents per share which was 7 cents lower than the average estimate.Same store sales dropped 3.3% last quarter. Full year earnings guidance was lowered to $3.30 from its previous estimate of $3.59. That’s an 8% drop.

Best Buy has been facing increased pressure from retail competitors. Competitors have aggressively slashed prices to compete against the electronics chain. The company blamed much of its problems on consumer appetite for tablet PC’s. Customers have been reluctant to buy mobile PC’s instead preferring to purchase iPads. So, is it time to cut bait on Best Buy?

I think that the price drop in Best Buy’s shares is actually a good thing. It’s an opportunity for investors to get in on the Best Buy bandwagon. The stock looked pricey at over $40 a share and was priced for the company’s earnings to keep outperforming. The stock is now close to becoming a value stock.  I expect the company’s Q4 earnings to rebound and the stock to be trading sharply highly 3 months from now.

The shares are a good buy at the current level and would be very attractive at $33.

Disclosure: I do not own shares of Best Buy.


  1. Short term yes. Long term, I’m still skeptical.

  2. Best Buy is benefiting from the lack of competition rather than succeeding doing something unique.

    With online shopping really taking off, Best Buy needs a more stronger online presence to keep up with the times.

    Not everyone shops online and that’s good for BBY. But this will gradually change. That’s why I think for a short term this is a good move.

    Eerily reminds me of Blockbuster Vs Netflix.

    • I still think people are hesitant to make big ticket item purchases over the Internet. I think Best Buy will always be a force because of that,

  3. I think all retailers, Best Buy included, are going to have a great 4th Quarter and a nice pop in the beginning of the year. However, I think 2011 will fizzle until the end as consumers once again reign in their spending.

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