The Impact Of Amazon's Smart Home Consultation Services On Best Buy

Following news of Amazon.com, Inc. AMZN offering smart home consultations, Bernstein analyst Brandon Fletcher looked into the impact the move might have on Best Buy Co Inc BBY.

“This morning news broke that Amazon launched free 45-minute smart home consultations in seven markets, with expansion into many additional markets likely to follow. While Amazon's service is still in its infancy, it helps enhance Amazon's already strong position in the smart home space and it is strong evidence of Amazon's continued commitment to consumer electronics,” Fletcher wrote.

Fletcher maintains his Underperform rating and $47 price target on Best Buy.

‘One Of The Fastest Growing Subsectors In Consumer Electronics’

Fletcher sees this move extending Amazon’s reach in the smart home industry. More consumers might now be interested in purchasing an Amazon Echo, as Amazon will be able to help tell them where to put Amazon's products in their home.

Implications To Best Buy

This move proves that Amazon is focused on building and developing its consumer electronics category.

“One risk to our bearish view on Best Buy was that Amazon could get distracted by other categories (e.g., Grocery) and ease up pressure in electronics. Amazon's services show that Amazon is staying focused on electronics, and is unlikely to let Best Buy coast along without a fight,” Fletcher said.

While Best Buy’s Geek Squad is only about 2–3 percent of Best Buy’s total revenue, it is clear this move could be very costly for Best Buy. Fletcher noted he expects that Amazon might be the one exception that can be Best Buy on both service and price.

Best Buy shares were down over 6 percent during Monday’s trading section. In a response to the move by Amazon, Best Buy issued the following press release:

Related Links: Best Buy Falls Following Amazon Geek Squad Report Best Buy Has Proven It Can Weather The Amazon Onslaught _________ Image Credit: By Ser Amantio di Nicolao (Own work) [CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons