Best Buy (BBY) is an American retail company with over 1,100 stores in the US and other countries. It focuses on selling technology hardware like computers, smartphones, home theatres, cameras, appliances, and entertainment devices.
It also provides other services like product installation, memberships, health, food and beverage, and outdoor living.
Best Buy’s business has done modestly well in the past few years because of its emphasis on an omnichannel approach. In addition to its stores, customers can buy these items on its website and applications. They can also use its Geek Squad service to install and repair these items.
Best Buy’s revenue in the last financial year was $43.4 billion, down from $46.29 billion in the last year. This decline is mostly because it is now facing substantial competition from e-commerce companies like eBay and Amazon. Many original equipment manufacturers like Dell, HP, and Lenovo have also invested in their direct-to-consumer businesses.
Best Buy’s stock was trading at $88.20, down by 15% from its highest level this year, while its HypeIndex metric has risen to 200%.
Positive hype
Best Buy’s positive hype is mostly because of its valuation, which has moderated in the past few months. It has a forward price-to-earnings ratio of 14.20, which is lower than the sector median of 17.8.
The enterprise value-to- EBITDA ratio has dropped to 8.59, which is also lower than the sector median of 11.20. These numbers mean that the company is trading at a lower valuation compared to other retailers and the S&P 500.
Best Buy has a leading market share in its electronic retail industry. It offers a differentiated approach compared to other companies like Amazon and eBay.
Its business is supported by the number of branches across all states in the United States.
Analysts believe that Best Buy’s business has room to go. The average stock target is $98.95, higher than the current $88.17.
They also expect that the company will resume its growth trajectory in the next financial year. The annual revenue this year will be $41.2 billion, followed by $41.89 billion a year later.
Best Buy has a forward dividend yield of about 4.26% and a healthy payout ratio of 57%.
Negative hype
The company reported weak financial results as customers waited for holiday deals. It also blamed its performance on weaker consumer spending. Its total sales dopped to $9.44 billion from $9.7 billion.
There are signs that Best Buy did not do well during the Thanksgiving weekend. Flash data showed that companies like Walmart and Amazon did well, while Target and Best Buy had a weak performance.
Best Buy’s Black Friday sales were 2% lower than what it made last year.
There are concerns that its dividend safety is at risk as its sales and profits drop. Its annual profit dropped to $1.27 billion in the trailing twelve months from over $2.5 billion in 2022.
The company is facing more competition from the likes of Amazon, Costco, and Walmart.
Best Buy’s cash has dropped to $832 million from over $5.4 billion in 2021. At the same time, the long-term debt has moved to $1.14 billion, while its capital leases stood at over $2.3 billion.
Best Buy stock analysis
The daily chart shows that the Best Buy share price has rallied by 47% from its lowest level in 2023. Recently, however, the stock has retreated to $88.40, down by 15% from its highest point this year.
The stock has formed a series of lower highs and higher highs in the past few months. However, it has also formed a broadening wedge, a popular reversal sign. A drop below the lower side of wedge will point to more downside in the near term. If this happens, the next point to watch will be at $80.
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HypeIndex is an AI platform that detects Hype in stocks and cryptos before it moves the market, providing reliable early detection for profitable investment opportunities.
The algorithm for our proprietary HypeIndex score is based on sentiment analysis, data science and machine learning.
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