This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Did Apple iPhone Sales Help Best Buy's First-Quarter Earnings?

Peter Keith, Piper Jaffray (Overweight; $34 PT)

After an extremely disappointing Q4, BBY's Q1 results are critically important to determine if gross margin pressure this past holiday was the result of an ultracompetitive pricing environment (a long-term issue) or promotional mis-execution by BBY (a short-term issue). In our view, BBY's GM pressure of -230 bps y/y in Q4 (the worst in at least 10 years) was due in part to company promos in a fading mobile phone cycle which essentially gave away profits. Improving its promo cadence could allow for GM upside. We also note that many initiatives and cost saves this year appear more GM focused vs. SG&A. Sales trends will likely remain lackluster for the foreseeable future in the absence of a meaningful product cycle. BBY will report Thursday morning and while we are modeled at Q1 EPS of $0.19 (below consensus of $0.20) we believe BBY could post GM upside on relatively low expectations.

Christopher Horvers, JPMorgan Chase (Overweight; $34 PT)

We are cautious on trends heading into earnings as reflected by our 1Q earnings estimate of $0.15 versus consensus of $0.20 (due to a negative 1.5% domestic comp and a 210-bp decline in domestic gross margin). That said, we remain positive on stock given long-term efficiency opportunities. Additionally, we believe the stock sets up well in the back half as the company laps a very difficult 4Q13 and as BBY improves its marketing, online effectiveness, and fulfillment options. Potential tailwinds for 2H include: improved ecommerce capabilities (e.g., CRM, website functionality, personalized marketing), continued cost costs (only half of the $765MM from 2013 had fully annualized to start the year), a return of momentum in BBY's mobile business now that they offer installment plan options, and ship from store gross margin benefits related to end of life inventory and returns, replacements, and damages-all against a 240-bp decline in domestic gross margin in 4Q13.

Must Read: Plunges: What Wall Street's Saying

Mike Baker, Deutsche Bank (Buy; $36 PT)

BBY has been able to beat estimates in the non-holiday quarters as pricing pressure is less of a factor, meaning cost savings are easier to bring to the bottom line. We think that will occur again in 1Q, setting up for a beat and potentially positive stock reaction.

--Written by Laurie Kulikowski in New York.

Target's Big Miss: What Wall Street Thinks

Staples' Restructuring Is 'Too Late,' Says Analyst

Why JCP's Online Strategy Is Not That Bad

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.
2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $117.81 0.00%
BBY $31.48 0.00%
FB $105.45 0.00%
GOOG $750.26 0.00%
TSLA $231.61 0.00%


Chart of I:DJI
DOW 17,798.49 -14.90 -0.08%
S&P 500 2,090.11 +1.24 0.06%
NASDAQ 5,127.5250 +11.3820 0.22%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs