Best Buy (BBY) Stock Dips, Analysts Note 'Deteriorating' Electronics Sales Trends

Best Buy (BBY) shares are tumbling on Monday after RBC Capital Markets downgraded the company to 'sector perform' from 'outperform' and lowered its price target to $36 from $42.
By U-Jin Lee ,

NEW YORK (TheStreet) -- Best Buy (BBY) - Get Report  shares are tumbling 2.56% to $31.22 on Monday after RBC Capital Markets earlier this morning downgraded the company to "sector perform" from "outperform" and lowered its price target to $36 from $42.

The firm pointed to "deteriorating sales trends" in the consumer electronic channel, which is prompting their concerns. 

Analysts are also more cautious about taking a bullish stance given Best Buy's historical volatility around the holidays. 

Overall, Best Buy's risk/reward appears "increasingly unattractive," the firm added.

Based in Richfield, MN, Best Buy operates as a retailer of technology products, services, and solutions in the U.S. and internationally.

Separately, TheStreet Ratings team rates BEST BUY CO INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

We rate BEST BUY CO INC (BBY) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth, reasonable valuation levels, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Specialty Retail industry average. The net income increased by 12.3% when compared to the same quarter one year prior, going from $146.00 million to $164.00 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 9.1%. Since the same quarter one year prior, revenues slightly increased by 0.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Net operating cash flow has significantly increased by 77.65% to $318.00 million when compared to the same quarter last year. In addition, BEST BUY CO INC has also vastly surpassed the industry average cash flow growth rate of -10.88%.
  • After a year of stock price fluctuations, the net result is that BBY's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • You can view the full analysis from the report here: BBY
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