Why Best Buy (BBY) Stock is Tumbling Today
NEW YORK (TheStreet) -- Shares of Best Buy (BBY) - Get Report are declining by 6.47% to $31.79 in mid-afternoon trading on Friday, as the retail sector plummets due to weak sales data released by the Commerce Department earlier today.
Best Buy is a Richfield, MN-based specialty electronics and entertainment retailer.
U.S. retail sales grew by 0.1% in October, missing the 0.3% increase economists had been expecting, Reuters reports.
Retail sales excluding automobiles, gasoline, building materials and food services were up by 0.2% last month versus a 0.1% rise in September.
"Even though we continue to expect personal spending to remain a key source of support for economic activity this quarter, this report does point to a very weak start to the quarter," Millan Mulraine, deputy chief economist at TD Securities told Reuters.
Additionally, retailer stocks are still feeling some pressure from Macy's (M) disappointing sales results reported earlier this week. The department store's third quarter profit dropped by 46% year over year. Sales fell by 5% from the year ago third quarter.
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
Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.