Best Buy Stock Has Proven that It Can Thrive Even in an Amazon.com World
Best Buy Co Inc (NYSE:BBY) has never been truer to its name. Best Buy stock could well be one of the most bullish stocks in the market now.
And as promising as it is now, BBY stock is in that right place to benefit from the new Apple Inc. (NASDAQ:AAPL) “iPhone,” the Google (Alphabet Inc (NASDAQ:GOOG)) “Pixel” phone, and a range of new virtual reality products ready to be launched ahead of the Christmas season. Then there is the new Star Wars movie, which is sure to introduce successful toys and gadgets such as last year’s top-seller: the “BB8” robot.
With all these catalysts for revenue, ahead of the busiest tech retail season of the year, it’s not hard to perceive the huge potential of Best Buy stock now. Best Buy has performed well in 2016, now trading at $38.18, having gained some 23.0% year-to-date. Yet at no point in the past few years has Best Buy stock looked better poised to reach back to its record highs of 2006-2007.
But this time it’s different and it’s better for BBY stock. It could get back to the $50-$55/share range—which would mean gains of 30-40%—and consolidate it. Indeed, best Buy is a much leaner company now than it was in the decadent days of easy credit of the pre-financial crisis years. These, as it happens, correspond to the same period when Best Buy shares reached their record highs.
Best Buy’s Performance in 2016 Has Exceeded Expectations
If those who ignore history are condemned to repeat it, then be aware that Best Buy has a rather optimistic track record behind it, having exceeded analysts’ estimates for four successive quarters. The company will present its next quarterly earnings on November 17. Going back to historical analogies, investors have reason to be optimistic about another surprise to beat analyst expectations.
Unfortunately, it may not be enough time for Best Buy to include what could be a revenue windfall. The retailer fully plans to exploit the potential demand for the Google Pixel phone, for instance. It has launched an offer, discounting the new Pixel that is barely out on the market, with a $100.00 Best Buy gift card. (Source: “Best Buy already has a Pixel deal you can’t pass up,” BGR, October 5, 2016.)
How can we know that this offer is going to be a success?
Surely, someone reading this article has either an interest in Best Buy and/or electronics in general. There’s a good chance they might be in the market for a new phone. Now they know where they can get one and take advantage of a nice promotion. That $100.00 will serve Best Buy well in the holiday season, when analysts are looking for standout retail performance.
BBY stock is clearly well placed to benefit. Whereas Best Buy may have frustrated investors last spring after the group announced both the departure of its chief financial officer (CFO) and a lowering of its outlook, its business has not suffered.
The Biggest Gains for BBY Could Be Around the Corner
Indeed, since last summer, BBY shares have gained over 20% thanks to blazing hot quarters. This enthusiasm is not so much for the actual numbers. Rather it is for the way and the extent to which Best Buy’s performance exceeded analysts’ expectations. Net earnings have gained in the order of 10%-11%. Analysts expected a loss instead.
Best Buy’s CFO, moreover, had this bullish thing to say about Best Buy. Its revenues should grow sufficiently in the second half to compensate for a slight decline in the first six months of the year. (Source: “Best Buy’s surge in online sales shows it won’t be toppled by Amazon,” CNBC, August 23, 2016.)
The other surprise is that, as good as Best Buy’s online sales are a strong factor for its success, its in-store sales have also increased. It means the brick and mortar locations can still add value. Best Buy, on a smaller scale of course, is combining the best of online shopping in the Amazon.com, Inc. (NASDAQ:AMZN) style and physical store retail activities. In fact, if anything, Best Buy has proven that there is a way to survive the Amazon onslaught. Best Buy is Amazon-proof.