Is Best Buy a Buy, Hold or Sell?
It did not help that holiday sales fell almost a full percent compared to the two percent gain analysts expected. In addition, the company expects to report a decline in Q4 operating profit on February 27.
Wall Street reacted to all the bad news as Wall Street often does. Best Buy fell 28.5 percent to close at $26.83 Thursday. Almost 74 million shares changed hands with Best Buy ending down 40 percent from its 52-week high of $44.66.
Brian Sozzi, chief strategist at Belus Capital Advisors said, "When you see a stock down 30 percent in a single say you don't necessarily rush to buy it." Sozzi added, "The market is trying to tell you something and you should listen."
Sozzi, who said he planned to publish a note Friday downgrading Best Buy, expects the stock to fall another 10 percent by the time the company releases fourth-quarter earnings.
Other analysts, like Morningstar’s R.J. Hottovy see the picture differently. "Best Buy is in a much better position than it was a year ago," Hottovy said. "In my mind, the shares now more accurately reflect very competitive retail environment that will be present in the years to come."
Following a triple-digit gain last year, this year’s plunge has caused some investors to think about loading up on Best Buy. Those investors are likely accepting Best Buy CEO, Hubert Joly’s explanation that the recent drop was a “speed bump.”
Joly said he was confident the company could turn things around, pointing to growing market share in a sector that is in overall decline.
According to The Wall Street Journal, overall market reaction was mixed.
Michael Lasser at UBS cut his rating from Buy to Neutral. Lasser cited the company’s disappointing holiday sales numbers saying they “illustrated the vulnerabilities” of Best Buy’s business model.
According to S&P analyst, Ian Gordon, “Greater-than-expected promotional activity in the industry during the holiday season is likely to persist into 2014, weighing on gross margins.” Gordon has a hold on Best Buy, saying the shares are “fairly valued.”
On the other hand, 60 percent of 25 analysts tracked by FactSet still rated Best Buy a Buy as of early Thursday.
Kate McShane of Citigroup said, “Best Buy has made good progress on closing the gap with Amazon as it continues to enhance its E-commerce channel.” McShane and Citigroup maintain that Best Buy is still in the initial stages of a turnaround.
One analyst, BB&T’s Anthony Chukumba lowered the PT on Best Buy from $45 to $39. Chukumba, none-the-less, kept a buy rating on the stock.
At the time of this writing, Jim Probasco had no position in any mentioned securities.
Latest Ratings for BBY
|Jul 2015||Bank of America||Downgrades||Buy||Underperform|
|Apr 2015||JP Morgan||Downgrades||Outperform||Neutral|
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