Many Reasons to Like Best Buy Stock
Best Buy Co Inc (NYSE:BBY), which attracts consumers with a robot in its flagship Manhattan store, is trading about two percent higher. The name of the game is still expectations and Best Buy stock has proven a good investment for those following analysts, rather than revenues. In fact, BBY stock’s quarterly revenue actually dropped four percent for the quarter at $13.62 billion. That amount is very close to expectations of $13.67 billion, though.
Best Buy stock has seen an overall uptrend since the stock market sell-off in mid-January. The company reported earnings of $1.40 a share for the fourth quarter of 2016, which ended in late January. Adjusted for special items, earnings per share (EPS) for the electronic equipment distributor amounted to $1.53, well above the Zacks Investment Research consensus of $1.40 EPS.
Best Buy also announced a 22% increase in its quarterly dividend to $0.28 per share. If that isn’t enough to persuade investors to seriously ponder BBY stock, the retailer will pay a special dividend of $0.45 per share. Best Buy will also repurchase $1.0 billion in shares over the next two years. (Source: “Best Buy Announces Capital Return to Shareholders,” Business Wire, February 25, 2016.)
Best Buy’s results and BBY stock’s recent performance have proven bullish analysts right. Specifically, at $26.00 per share—where the stock landed after warning that holiday sales dropped 0.8%—BBY stock is a bargain.
Best Buy has kept costs in check, increasing operating margins. But it’s not all about cuts at Best Buy. The retailer is ambitious and surviving against competitors such as Amazon.com, Inc. where it counts: online sales. The electronics retailer boasted double-digit online sales growth in the U.S., bumping its penetration to 16.7% of its domestic revenue. (Source: “Don’t give up on Best Buy just yet: Analysts,” CNBC, January 14, 2016.)
BBY stock CEO Hubert Joly, amid savings, has expanded online sales, while also attracting more buyers to its retail brick-and-mortar stores. The Best Buy robot in Manhattan, named “Chloe,” is one of the more visible retail enhancement tools. Chloe makes it easy and fun for shoppers to locate items from video discs to music, movies, and games. (Source: “I went to Best Buy and encountered a robot named Chloe — and now I’m convinced she’s the future of retail,” Business Insider, October 23, 2015.)
Longer-term, the prospects are even rosier for Best Buy. While the smartphone market has become saturated and the iPhone is starting to look and perform too much like some of its competitors, a new generation of products will revamp smartphone sales at Best Buy by the end of the summer. Best Buy will sell the new Samsung “Galaxy S7” and “Galaxy S7 Edge,” along with the “iPhone 7,” when it’s eventually released towards the fall. Both of these smartphones offer special features, such as water resistance, 3D cameras, panoramic photography, and wireless charging—all features customers will line up for days to be the first to use them on the new devices.
That’s what Best Buy anticipates with its strong guidance for the second half of 2016. (Source: “Cramer: Best Buy banking on new iPhone 7,” CNBC, February 25, 2016.)