Best Buy Stock: Poised for the Holiday Season

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Best Buy Co. Inc. (BBY) heads into the holiday selling season with some serious and unexpected momentum thanks to surprisingly strong earnings that sent Best Buy stock soaring Thursday.

Best Buy, BBY, best buy stock, BBY stockBest Buy stock was the market’s top performer last year, offering the mother of all rebound trades. After being priced down for the possibility of bankruptcy, Best Buy stock gained more than 200% in 2013 after the troubled retailer failed to implode.

But that was last year, and 2014 has been much less kind to Best Buy stock. Surviving was good enough for a big, year-long trade in Best Buy stock, but there’s much less upside betting on the company growing, much less thriving.

Indeed, Best Buy stock is down 11% for the year-to-date, a mirror opposite of the S&P 500’s gain of 11%. That has it trading at levels last seen in August 2013. Heck, even after those declines, there’s still no shortage of bears on BBY, as it trades under the weight of heavy short interest.

The problem with BBY is that although it can cut costs and improve stores, there’s little it can do about the shift of shoppers buying their consumer electronics online, or even at deep discount stores. For an increasing number of shoppers, BBY has become nothing more than a showroom to check out potential purchases before picking them up from Amazon (AMZN).

A series of weak results — and truly disappointing holiday sales last year — really seemed to have set the clock ticking on BBY, but now the most recent earnings show that it may still have a fighting chance. After all, the better-than-expected results were driven mostly by strong online sales from BBY itself.

Best Buy Stock Pops On Earnings

For the most recent quarter, Best Buy earnings rose to $107 million, or 32 cents a share, from $54 million, or 18 cents, a year ago. Analysts average earnings estimate stood at 25 cents a share.

Revenue also topped estimates, increasing to $9.4 billion from $9.3 billion last year. Wall Street was looking for the top line to hit $9.11 billion. Most importantly, same-store sales — a key measure of a retailers’ health — gained 2.2% vs. a forecast of 2%.

Almost ironically, much of the upside was driven by strong growth in the online business. Sales in U.S. stores rose a respectable 3.2%, but online sales rose 21.6%, driven by TVs, tablets, computers and video games and systems.

A strong holiday season could set off another round of riding Best Buy stock higher on it showing signs of life, but that doesn’t make it set-it-and-forget it bet. The landscape is only getting tougher for bricks-and-mortar consumer electronics retailers and Best Buy can fight it for so long. Eventually BBY will run out of stores to close, costs to cut and locations in need of sprucing up.

Best Buy stock is poised to have an interesting holiday selling season and beyond, and that could prove lucrative for adroit traders. However, the fundamentals are too troubled to make BBY any kind of longer term investment.

As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2014/11/best-buy-stock-bby-earnings-2/.

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