Best Buy - The Retail Store Defying Gravity (What Goes Up Must Come Down)

Aug. 25, 2017 11:13 AM ETBest Buy Co., Inc. (BBY)29 Comments
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The Dividend Guy


  • Since Jan. 1, 2016, BBY stock price has more than doubled (as of Aug. 25, 2017).
  • Best Buy has beaten the Street's expectations in past quarters -- will they do it again on Aug. 29?
  • While the company has cut their expenses to a minimum and made shareholders happy, I see another RadioShack story going on.

What would you tell me if I offered you the opportunity to invest in a stock that has doubled in value since Jan. 1, 2016, (as of Aug. 25) and has doubled its dividend payouts over the past five years -- and that is trading at a P/E of 17 in this crazy market? This is the recent Best Buy (NYSE:BBY) fairy tale:

But do you really buy that? At a time when Amazon (AMZN) is making the world of retail shake, Best Buy defies gravity with stronger sales and earnings and beats analysts' expectation along the way. However, the more I think about it, the more I smell a burnt transistor in the storage room. I really think the BBY story will end up like RadioShack.

Understanding the Business

Best Buy is an electronic store. It sells a wide range of technology products from smartphones to TVs, gaming consoles, computers, etc. Best Buys operates 1,026 stores and 309 mobile standalone stores in the U.S. It has also an international presence, including 134 stores (+53 mobile) in Canada and 20 stores in Mexico. Best Buy is strong in North America due to its broad presence and brand name. However, it can't do much in terms of product diversification. What is the difference between the iPhone 7 you buy from Best Buy and the one you buy online from Amazon? Yeah … exactly.


Don't be fooled by the "huge drop" of revenue from 2012 to 2014. This is because BBY decided to sell the rest of their international division and solely keep the North American stores (in Canada, the U.S., and Mexico). Since then, revenues have not been going anywhere. When the market gets super excited about 1.6% growth in sales when it expected a drop of 1.5%, you know something is wrong.

This article was written by

The Dividend Guy profile picture
My name is Mike and I’m the author of The Dividend Guy Blog & The Dividend Monk along with the owner and portfolio manager here at Dividend Stocks Rock (DSR). I earned my bachelor degree in finance-marketing, own a CFP title along with an MBA in financial services. Besides being a passionate investor, I’m also happily married with three beautiful children. I started my online venture to educate people about investing and to be able to spend more time with my family. I started my career in the financial industry back in 2003. I earned several promotions along with a good pile of diplomas. I had lots of fun working with clients in private banking for half a decade, but thought I could do more with my life. In 2016, I decided to take a leap of faith and left everything behind to travel across North America and Central America with my family. We drove through nine countries and stayed three months in Costa Rica before returning home. This was an eye-opening adventure that led me in 2017 to quit my job in the financial industry and pursue my dream; helping others with their personal finance through my investing websites. You just found the reason why I quit my suit & tie job!

Disclosure: I am/we are long AMZN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I do not hold BBY in my DividendStocksRock portfolios.

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