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Is it Best Not to Buy Best Buy Now?
Stock Analysis & Ideas

Is it Best Not to Buy Best Buy Now?

Shares of Best Buy (NYSE: BBY) closed 2.5% lower on Friday, January 14, and slid a further 1.24% in the pre-market hours today. Moreover, with an 8.06% decline, the share price performance over the past year is not so encouraging either. The prices seemed to be doing well for a brief period last year and peaked on November 22. However, despite better-than-expected 3QF22 results that were released on November 23, the prices fell sharply and have been on a downward trajectory ever since.

Ongoing supply-chain issues and a lackluster 4QF22 projection seemed to have driven investors out of the BBY stock. Management expects a contraction in the adjusted gross profit rate, and a substantial increase in SG&A expenses in the ongoing quarter (November-January).

Traffic Trends Downward

As if the flight of investors weren’t enough, Best Buy ended 2021 with a lower number of customers as well. The company’s website is currently among the top trending websites, as one of the websites losing traffic at the fastest rate. The period of gloom after November’s earnings release mirrored itself in the decline in the consumer electronics retailer’s website footfall.

Digging deeper into the website traffic tool, we found that in December, visits to the Best Buy website from unique users dropped 9.08% to 152.9 million globally, as compared with 168.2 million recorded in November.

On a year-over-year basis, the number of unique visitors to the Best Buy website saw a reduction of 12.76% in December last year, which makes us think that the traffic loss during the month may be a usual seasonal trend.

That being said, the general retail scene in the U.S. in December was not very promising either. Total retail sales in December dropped 1.9% amid rising inflation, staff shortages, and the onslaught of Omicron.

As with any company in the retail business, website traffic translates as potential customers. The more the virtual footfall, the more the sales prospects. However, the persisting supply chain issues weighed heavily on Best Buy this past year.

Experts Await Better Entry/Exit Point

Earlier this month, Wells Fargo analyst Zachary Fadem trimmed the price target to $110 from $125, while maintaining a Hold rating on the stock. Fadem believes Best Buy faces higher supply chain risks.

The sentiment of the rest of Wall Street resonates with that of Fadem, with a Hold rating on the stock, based on 6 Buys, 5 Holds, and 1 Sell. The Best Buy stock prediction shows the price target to be $134.58 on average, among analysts.

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