Is Wall Street Expecting a Best Buy Turnaround?

Michael Teague |

best buy closing stores, best buy loss, best buy closuresThe electronics retailer Best Buy (BBY) made a strong showing on Tuesday, after two ratings agencies upgraded the company’s status.  Citing the company’s recent willingness to “make tough decisions” and meet financial goals, as well as increasing competition in the mobile device market, Stifel Nicolaus's David Schick upgraded the company’s stock to “buy”.  Meanwhile Barclay’s upgraded it to “overweight”, with analyst Alan Rifkin noting the strength of holiday comps, increased cash-flow growth resulting from cost cuts, and continued vendor loyalty, as well as changes in management.  The company's share price rose slightly over 2.7 percent to close at $17.33.

This news comes after a January 9th low of $11.59, a time during which it was commonly thought that the retailer would finally succumb to the competition from online stores like Amazon (AMZN), in tandem with other retailers like Target (TGT) and Wal-Mart (WMT), all of whom have outperformed the company until very recently.  All of this was compounded by persistent rumors about company’s founder Richard Shulze’s attempts to buy back the company and take it private.

But several variables have turned in Best Buy’s favor in the last month that may explain the fact that their performance is up 46.2 percent on the year, with a forward price-to-earnings ratio of just a touch over 8 percent.

Firstly, in a rather drastic move, the company has announced that it will offer its customers to match prices with several popular online retailers.  As risky a play as some have interpreted this as, there is an undeniable logic to it.  The practice of “showrooming”, in which Best Buy is for all intents and purposes used by shoppers as a free show room for products they intend to purchase later and cheaper at some online retailer, has hurt the company in terms of sales and prestige.  While it may not completely put an end to showrooming, the price-matching scheme does offer the added benefit to consumers of being able to take their product home to enjoy immediately.

The other big break for the company comes in the form of pending bi-partisan tax legislation set for a vote sometime this year that would put in place federal regulations for taxing online retailers. With internet sales growing to over 5 percent of all sales in the United States, and no signs of slowing down, the current legislation allows Amazon and other online “e-tailers” to sell products, depending upon the state from which they are purchased, without charging their customers sales tax.  This could potentially shift at least some of the momentum back in the favor of on-site retailers, and Best Buy especially, since if sales tax has to be paid either way, it could turn the wait for shipping into a much bigger nuisance than it currently is.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to:


Symbol Name Price Change % Volume
WMT Wal-Mart Stores Inc. 67.18 -0.44 -0.65 12,054,682
GE23E General Electric Co 1.250% Nt Eur 2023 n/a n/a n/a 0
TGT Target Corporation 64.10 -1.29 -1.97 12,983,487
AMZN Inc. 808.33 -0.71 -0.09 3,376,196
BBY Best Buy Co. Inc. 43.36 -0.27 -0.62 6,142,185


Emerging Growth

Winston Gold Mining Corp.

Winston Gold Mining Corp is a mineral exploration and development company. The Company is engaged in acquiring, exploring, developing, and operating mining properties.

Private Markets

XY Find It

Founded by serial entrepreneur Arie Trouw, XY Findables follows a single guiding principle: customers should never lose anything important again. With over 50,000 users around the world, more than 100,000…

Cross Campus

With over 500 members and operating 80,000 square feet by summer 2016, Cross Campus is one of the country’s top ten shared, collaborative office or "coworking" operators in the US.…