Market Overview

Retail Analyst Doesn't Understand The Best Buy Sell-Off

Retail Analyst Doesn't Understand The Best Buy Sell-Off

Best Buy Co Inc (NYSE: BBY) reported Tuesday its second-quarter results, which prompted an immediate sell-off in the stock.

The Analyst

Moody's Charles O'Shea talked Best Buy on CNBC's "Squawk Box" segment Tuesday morning.

The Thesis

Best Buy is among the top performing retailers over the past few years and it needs to hold on to that reputation as the stock is "priced for perfection," O'Shea said on CNBC. This narrative is a complete reversal from a few years ago when the "world thought Best Buy is going to get Amazoned." Working in the company's favor is the fact that consumers want to shop in-store for big ticket items and get advice from knowledgeable salespeople before spending a lot of money.

O'Shea said he "frankly doesn't understand why the market is disappointed." Granted, management's earnings guidance for the third quarter of 79 to 84 cents a share was short of the 92 cents expected, but as highlighted by CNBC's Joe Kernen, management also lifted multiple metrics for the full year.

Heading into Best Buy's release, the company was considered among the most attractive retailers from a credit point of view, O'Shea said. This view improved exiting the earnings report as the company lowered its long-term debt from $1.31 billion a year ago to $801 million. Best Buy's debt load is more favorable to retail titan Walmart Inc (NYSE: WMT), which is "spending so much."

O'Shea said investors shouldn't worry about single quarter performances as there are so many positive attributes to Best Buy's business and the encouraging story is "going to continue to be a positive one."

Price Action

Shares of Best Buy were trading lower by 6 percent to $76.86 at time of publication.

Related Links:

3 Reasons Target Is A Better Investment Than Best Buy, According To Morgan Stanley

Amazon, Best Buy Find 'Mutually Beneficial Opportunities' In TV Partnership

Photo credit: Miosotis Jade (Own work), via Wikimedia Commons

Posted-In: Charles OShea CNBC electronicsAnalyst Color Earnings News Guidance Media Best of Benzinga


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