Credit Suisse’s Seth Sigman believes that despite trading at near its prior trough levels, Best Buy Co Inc BBY offers meaningful value.
Sigman downgraded the rating on the company from Outperform to Neutral, while lowering the price target from $36.50 to $31.00.
The analyst believes the company has “a more difficult battle between controllable vs. uncontrollable factors this year, which creates uncertainty that may continue to limit upside to the stock in the near-term.”
Near-Term Concerns
Sigman mentioned that there were two key concerns for the near term. Firstly, the mobile category might fail to deliver the improvement required for Best Buy to achieve the Q4 comp estimates.
Secondly, the company has been lapping market share benefits from peers, which might become less incremental through 2016 and 2017.
“The underlying concern is that expectations assume an improvement in Q4, and visibility is lacking,” the analyst explained.
Underlying Value
“We continue to believe in this management team, and the transformation strategy, which has led to significant market share gains and stronger results even during some difficult periods,” Sigman pointed out.
The analyst expects Best Buy to make further progress in 2016, and continues to believe that there is underlying value in the stock, due to the cash flow.
However, sales are equally important at this stage of transformation in the investment story and the analyst expects to see signs of improvement in 2H.
The Q4 and full-year EPS estimates have been lowered.
Recent Performance
Over the past five trading days, Best Buy has sunk 10.36 percent.
Year-to-date, the stock is down 4.76 percent, while over the past 12-month period, it's down 15.01 percent.
At time of writing, Best Buy was down 0.51 percent on the day at $29.02.
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