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Best Buy: A Retail Titan

Feb. 01, 2019 4:08 PM ETBest Buy Co., Inc. (BBY)16 Comments
Yanni Lodato profile picture
Yanni Lodato


  • Best Buy exhibits a number of business advantages.
  • The stock is more competitively advantaged than retail peers.
  • BBY remains a great long-term holding, but in the short term, the stock elicits a hold recommendation due to economic uncertainties.

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Down 20% over the past year, Best Buy (NYSE:BBY) demonstrates investment intrigue as a result of the company's discounted valuation, compelling dividend yield of 3.04%, healthy financials, and attractive value proposition. Driven down by online retail competition from Amazon (AMZN) and slight revenue contraction, past investor sentiment on BBY has not been very optimistic. This article will offer an investment analysis of BBY; discussing the company's financials, dividend, business strengths, valuation, and growth trajectory.

Investment Thesis

Best Buy remains one of the most formidable names in the consumer electronics retail space. BBY has successfully weathered the rise of Amazon and other online retail competitors due to the company's competitive pricing, personalized store buying experience, and online integrations. With $42 billion in annual revenues, BBY remains one of the largest multi-channel consumer electronics retailers with stores in the U.S., Canada, China, and Mexico. The company boasts 1,500 physical store locations in the United States and operates the seventh largest online retail e-commerce platform. Such significant geographical diversification and prominent online sales presence enable the company to cater to a broader consumer base, appealing to both online and in-store buying customer tendencies. BBY offers a very extensive selection of consumer electronic items, ranging from digital hardware, tech devices, game systems, video games, computers, cameras, home appliances, and tech devices.

The company's concentration in the consumer electronics segment offers advantageous brand differentiation as high-priced consumer electronic items afford better profit margins and are readily demanded by consumers. Today's modern day society brings with it an insatiable infatuation with technology-related items. Revenue opportunities within the highly demanded consumer electronics sector are poised for substantial upside, as over the next five years, the current revenue pool of $331 billion in consumer electronics spending is expected to increase to $430 billion by 2023. Increased demand for consumer

This article was written by

Yanni Lodato profile picture
Oracle Investment Research helps individual investors find high-quality stocks with strong competitive advantages suitable for long-term holding. We cover dividend stocks, us stocks, and high growth advantageous risk reward stock opportunities ----------------------------------------------------------------------

Analyst’s Disclosure: I am/we are long BBY. 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.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (16)

AndrewBurnett profile picture
hey esavela, i just posted Best Buy's Market Mirage in the earnings section. A more detailed article of my short term and long term trade with the company.
esavela profile picture
Hmmm. Yanni, @AndrewBurnett brings up an interesting point. What's up with this? Also, when did he sell? You know sometimes these guys do sell off some of their positions to diversify--or to buy some mansion on the water with a 5$ million yacht. So it's not always a bad thing. LOL
AndrewBurnett profile picture
Yanni, Hubert Joly, CEO, sold $17 million at $69. Please help me understand your research. Thank you
Larry Hall profile picture
I would describe the company as a survivor, not a titan. They have a diverse product offering and good services like GeekSquad, and some loyal customers. Is it enough to offset the Amazon Effect, and are there enough customers buying enough to bring about profits that help boost the stock price? Not convinced. Owned BBY and made a nice short-term profit from it, but not persuaded it is a solid long-term buy.
What will be next Dividend increase?
Jamjack profile picture
In home electronics they are a retail titan. They sure get a part of my disposable income. I have no position in the stock.
AndrewBurnett profile picture
A few things:

Best Buy has assorted niche consumer loyalty support that like any company continues to keep consumers in rotation.
I am cautious in an economy that tells us people are demanding for less tech-products.
Apple’s missed earnings and trade talks may worsen for tech through a 25% tariff. If Apple is finding it hard to attract foot traffic then I must infer that consumers aren’t just spending less at Apple but other publicly traded retail tech suppliers.

If they can make up returns in their home improvement business and diversify they may be a great buy. Yet my short- term and considerably long term position in tech is short because of the consumer data reporting long term negative growth in the electronics industry. www.google.com/...

They’d have to innovate a new cash cow to support the facts which say consumer spending is falling and that the margins are thinning. The three quarters out rule of purchasing equity for myself in the marketplace is evaluating through their projected growth & right now we do not have growth.
Best Buy cannot make up earnings without innovating new revenue opportunities. In absent of that new cash cow product I believe we will see a Sears and Toy’s R Us trend into 2019-2020 for Best Buy’s stock price.

Hubert Joly, CEO, sold his shares at $69/ share. Into 2020 brick & mortar stocks must repay their lenders. This significant loss of operating income effects the value of the stock. This bubble as economists believe will be caused by corporate debt.
The ‘Corporate Debt Crisis’ I must refer to Ray Dalio and believe for myself that Best Buy is seeing falling margins through discounting TV’s and tech products. This decline in margins will have investors selling the stock as their current valuation does not reflect the next 3-9 months of their businesses growth. Their overvalued at 15 x earnings.www.businessinsider.com/...

Best Buy has an overwhelming 43% debt to equity reality to face. In a recessionary slowdown we look to answer the problem in the economy. 2000, a tank in tech stocks that had no tangible value. 2007 the mortgage bubble.
The theory and reason for slowdown bear activity lies in this ‘bubble of corporate debt.’
Jamjack profile picture
I'm beginning to think if companies that have the cash flows will have little problem findind plenty of income starved demographic large numbers of seniors wanting the income. This is a general comment and should not be considered as an endorsement that any particular stock has cash flow to do this. Especially retail which is a very difficult business when it comes to the very things you point to.
AndrewBurnett profile picture
5ofdiamonds I couldn’t agree more
AndrewBurnett profile picture
Yabin, where are you getting your research for Bby retail titan? You do believe they can expand operations in a market that is consuming less tech products on average? They’re numbers are on the decline and your making a statement that their .43 debt to equity is a solid play for investors... I would love to hear more why you think this is such a great move. Thank you
5ofDiamonds profile picture
Hi @Yanni Lodato

Please compare Best Buy with retailers like $DLTR, $DG, $ROST, $TJX, $WMT.

If you do, you may not choose to talk about BBY before them.

Why publicize BBY as a retail Titan?

My 2c.
esavela profile picture
WMT is dead money for a trader. More upside with BBY IMHO.
5ofDiamonds profile picture

The title reads: "Best Buy: A Retail Titan"

It should be: "Best Buy: A Trader's Titan in Retail" ?

Or, "Best Buy: Day trade it between 2-4PM Tomorrow!"

An author who writes it all from their own perspective should not be an author. S/he should only comment.

My 2c.
You forgot the Amazonphobia crowd that avoids the Seattle e-tailer at all means. Besides after the recent earnings of AMZN and it's exorbitantly high PE it appears that Amazon may have reached 'peak Amazon sales' in the USA as a growth company. The loss of Sears as a once strong retailer in appliances too is a plus for Best Buy.
esavela profile picture
Good point on the appliances @bobcatone.
esavela profile picture
Good article on an underestimated long term holding. You state: "BBY is also able to capitalize on human interactions with customers...knowledgeable sales personal help customers make more informed decisions, making an otherwise intimidating and frustrating buying process more simplistic...." EXACTLY on point. However, you failed to add this VERY KEY competitive advantage for BBY over AMZN: BBY has recently launched "Total Tech Support" to their Geek Squad system. If you're a regular customer you can get personalized home installations, optimizations, recommendations for the right equipment, etc. I have the same tech come out to my house anytime I need some help with internet or equipment. It is impossible for AMZN to provide this kind of service. And regarding delivery, I can almost always get the item I need delivered in 1-2 days--or just go and pick it up with the help of those very knowledgeable in store personnel. Takeaway: Buy stocks in companies you know and respect (especially when cheap) and hold. Best Buy is indeed a best buy at this level.
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