Virtual Reality Could Be Revolutionary For Best Buy

As virtual reality (VR) industry sales have been expanding, reaching an estimated $6.00 billion according to Industrial Distribution Group, Best Buy Co Inc BBY has been referred by some analysts, including BTIG’s Alan Rifkin, to be among a list of companies ready to take advantage of the VR’s growth.

BTIG’s Take

Rifkin believes VR, the latest emerging category within consumer electronics, could provide significant upside for BestBuy post-2016.

Although Rifkin believes Best Buy’s benefit from VR “will be limited,” the analyst sees VR becoming a more meaningful industry contributor, and for Best Buy especially.

The Beneficiary Of New Technologies

“Typically Best Buy is an early beneficiary of new technologies, as education grows, price points are elevated, and consumers desire in store demos,” said Rifkin.

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The entertainment category represents about 9 percent of Best Buy’s revenues, which could expand once VR expands.

Based on BTIG field research, Best Buy has accelerated the rollout of stores offering live demonstrations such as Facebook Inc FB's Oculus Rift “from 48 stores in May 2016 to about 110 stores” at the time of writing and about 500 by the fall, according to Rifkin.

Impact

“If VR can reach $200–400 million in sales, equivalent to 6–11 percent of BBY’s entertainment category, we believe it would contribute 50–100 bp to comp sales growth,” stated the BTIG analyst.

Despite Best Buy’s potential benefit from the growing virtual reality segment, BTIG has a Neutral rating on Best Buy and Facebook.

According to TipRanks, Alan Rifkin is among the better analyst's covering Best Buy, with a 66 percent success rating and a +12 percent average return per recommendation.

At the time of writing, Best Buy traded flat in Tuesday’s pre-market, having closed Monday's trading down 0.39 percent at $33.47.