Bank of America Merrill Lynch Reiterates Underperform Rating, $9 PT on Best Buy

In a report published Friday, Bank of America Merrill Lynch reiterated its Underperform rating and $9.00 price target on Best Buy Co.

. BofA Merrill Lynch noted, “Citing lower than expected accounts payable, BBY materially cut its free cash flow guidance to ~$500mn, from $850mn-$1.05bn prior, which we had believed was too optimistic. We have lowered our FCF estimate from $580mn to $432mn. In our opinion, this raises vendor financing concerns, and also furthers our belief that a Schulze deal is unlikely given deteriorating cash flows...While holiday sales were slightly better than we thought, we believe BBY chased sales with its price matching program. We expect that GP dollars will decline by HSD in 4Q12, similar to 3Q12. As such, we have lowered our estimates to reflect lower GM. Our 4Q EPS estimate is now $1.28 ($1.36 prior), still based on a (3)% comp. Our FY 2012 EPS estimate is now $2.23 ($2.30 prior) on (4)% comps; 2013E EPS is $1.65 ($1.81 prior); 2014E EPS is $1.40 ($1.55 prior). Our PO of $9 remains based on 5x our 2013E EPS. We reiterate our Underperform rating.” Best Buy Co. closed on Thursday at $12.21.