Bet on Best Buy as it Hits New High - Analyst Blog

By Zacks Equity Research,

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Shares of Best Buy Co., Inc . ( BBY ) surged to attain a new 52-week high of $30.35 on Jul 9, 2013, before closing at $29.73. Shares of this Zacks Rank #3 (Hold) stock have amassed a year-to-date return of roughly 155.2%.

Based on the current price, this consumer electronic retailer is 12.1% above the Zacks Consensus average analyst price target of $26.53. The company currently trades at a forward P/E of 13.03x, a discount of 5% to the peer group average of 13.72x.

Best Buy is undergoing a turnaround program including a price match policy, multi-channel strategy, multi-year cost reduction program and closure of some big box stores. In the first quarter of fiscal 2014, the company lowered its cost by $175 million, in addition to $150 million reduced in the fourth quarter of fiscal 2013.

Best Buy's online sales performance remains a positive. Domestic online sales jumped 7.1% during the quarter. We believe that the company is leaving no stone unturned in wooing consumers and capturing incremental revenue, as evident from its strategic initiative of opening "Samsung Experience Shops" within its stores.

It also entered into a similar agreement with Microsoft Corp. ( MSFT ) to roll out "Windows Store" across its 500 outlets in the U.S. with an additional 100 in Canada. For Best Buy, the deal adds more compelling products to its portfolio to better compete against discount giants such as Wal-Mart Stores Inc. ( WMT ) and online retailers like Inc. ( AMZN ).

Best Buy also entered into a contract to divest its 50% stake in Best Buy Europe to Carphone Warehouse Group, the joint venture partner in the same. The move would facilitate the company to concentrate more on its U.S. operations. We believe that the step to offload its stake in Best Buy Europe would augment its return on capital employed.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Stocks: AMZN , BBY , MSFT , WMT

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