Best Buy Disappoints

Best Buy (BBY) reported earnings this evening and the results were not good. The electronics retailer saw its same store sales drop for the fifth straight quarter. The company’s electronics sales are being squeezed by Walmart (AMZN), Costco (COST), and Amazon (AMZN).   The company saw its quarterly profit drop 30 percent.

Best Buy Quarterly Earnings Release

best buyInvestors are abandoning the stock because of fears of the retailer losing market share in the industry. Shares of Best Buy plunged 6.4% during the day and dropped to $23.35 per share. Best Buy has seen its stock price get cut in half during the past year.

Best Buy’s revenue came in at $11.2 billion dollars and reported a profit of $177 million which came out to 47 cents a share. Despite the company’s rough growth, Best Buy sill expects its  earnings per share outlook to come in between $3.35  to $3.65. The increase in earnings per share is due to the reduced number of shares outstanding since the company has been aggressively buying back shares. The company has returned nearly $2 billion dollars back to shareholders via dividends and share repurchases.

Things may look bleak for Best Buy but the stock looks like a good value investment. The company was able to increase its online sales 13% and is counting on further growth in this sector over the next year. Best Buy is hoping to get increased growth from its mobile division. The mobile computing division saw sames store sales growth of 9 percent and appliances  increased 12 percent. There was domestic segment connections growth of 4 percent and international segment highlighted by Five Star China growth of 7 percent

Best Buy currently trades at 6 to 7 times this year’s earnings estimate. The company should be able to achieve single digit revenue growth over the next year or two. Best But is trading at 1.3 times book value, 0.2 times sales, and 3.8 times cash flow. The company has a debt to equity ratio of 0.3 times.  Best Buy has a dividend of 64 cents and a yield of 2.6%.

The stock is a decent company to speculate on in the $23 range.

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2 Responses to “Best Buy Disappoints”

  1. avatar Money Beagle says:

    I have not bought anything at Best Buy in years. We have curbed our electronics purchases quite a bit since we’ve had kids, but even then, the best deals I’ve found are usually online. Just the other day, I needed to get a new cell phone so I called the Sprint store as well as Best Buy. Unfortunately, Best Buy was over $100 more expensive on every phone. That aside, I remember when Best Buy came in the area, they were dirt cheap compared to music stores and other electronic stores. Now, they don’t impress me in the least in terms of price.

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