Sarah Roden

About the Author Sarah Roden

Sarah writes about stock market news for TipRanks. She graduated as member of Phi Beta Kappa from the University of Richmond in Richmond, Virginia.

Best Buy Reports Record Holiday Revenue

On January 15th, Best Buy (NYSE: BBY) announced earnings from the “Holiday period,” referring to the nine weeks ending on January 3rd. Highlights from the report include a 2.1% year-over-year increase in revenue and a 2.6% year-over-year increase in domestic comparable sales. This report excludes revenue derived from Best Buy’s Five Star business in China.

Best Buy president and CEO, Hubert Joly, commented, “A compelling merchandise assortment, strong multi-channel execution, and a more favorable year-over-year macroeconomic environment drove these better-than-expected results. We were also able to capitalize on the product cycles in large screen televisions and mobile phones. These two categories were the primary drivers of our year-over-year revenue growth, more than offsetting significant weakness in tablets.”

Despite technical issues plaguing Best Buy’s website on Black Friday and over the weekend, online sales grew 13.4% to $1.49 billion. Best Buy attributed the increase to “(1) substantially improved inventory availability made possible by the chain-wide rollout of our ship-from-store capability in January 2014; (2) higher conversion rates; and (3) increased traffic driven by greater investment in online digital marketing,” according to a press release.

In light of the holiday sales, Best Buy updated their fourth quarter outlook. Sharon McCollam, CFO, noted, “Enterprise comparable sales growth, excluding the impact of installment billing, near 1% versus our previous outlook of near flat” and “non-GAAP operating income rate expansion of 75 to 90 basis points versus our previous outlook of 50 basis points.”

On January 15th, analyst Denise Chai of Bank of America Merrill Lynch maintained a Buy rating on Best Buy and lowered her price target from $48 to $45. Chai noted that the mediocre Q4 guidance precipitated the price drop. Chai wrote, “Management is calling for 1H15 EBIT to decline 30-50bps and while this does include pressure from new investments… we believe it also reflects deleverage on guidance for flat to negative comps.” The analyst continued, “However, we believe this is too conservative given continued benefits from TV, gaming, and appliance cycles. We note BBY had guided to LSD comp decline in 3Q/4Q but reported 3Q comp of +2.2 percent and holiday comp of +2.5 percent.”

Denise Chai has a 61% overall success rate recommending stocks with a +6.1% average return per recommendation.

Separately on January 13th, analyst Matthew J Fassler of Goldman Sachs upgraded Best Buy from Netural to Buy with a $45 price target before the company released holiday earnings. Fassler is optimistic about the future of TV sales, noting “With solid sector fundamentals, including a surge in advanced TV sales, we are positioned above consensus for the next three quarters.” He continued, “Beyond tactical considerations, we note BBY’s positioning as the sole surviving national specialty retailer in a category with increased product excitement; BBY’s better online sales growth; and, the reality that its pricing is increasingly at parity with Amazon, especially in TVs.”

Matthew J Fassler has a 51% overall success rate recommending stocks with a +5.3% average return per recommendation.

On average, the top analyst consensus for Best Buy on TipRanks is Moderate Buy.

  • capamerica

    In the height of the recession in 2011, BBY had $50 Billion in Revenue and $1.27 Billion in Profit with a year-end stock price of $24. In the height of the recovery in 2014, BBY sales are lower by 20% to $42 Billion and less than half of that profit at $500 Million with a year-end stock price of $39. Clearly the company is dying. It is not a question of if, but when.

    Amazon, Costco, Walmart will all keep eroding its core electronics business. And its move into washers and dryers will not last with Home Depot and Lowe’s eating that lunch too. Best Buy is like Circuit City, Barnes & Noble, Borders, etc. Even their online business is stagnant with only a $1.3 billion in revenue that grew 13%. Based on a its low starting point it should be jumping 50%. It is closer to their main offline business that barely grew at 2-3%. Online behemoth Amazon grew over 20% last year (and over 45% in August 2014 YOY). That is huge growth for an $88 Billion business.

    So when you have analysts upgrading the stock to $40-50 that means they have other departments (or friends?) who are making money on the trades. It no way does it deserve double digit P/E multiples. No honest analyst can suggest a long-term buy for this company. Short-term trading maybe, but definitely not long term. It is time that analysts start being held accountable for misleading the public for monetary gain.