Best Buy has warned that same-store sales could be flat or lower for 2021 as the pandemic fades.
Patrick T. Fallon / AFP via Getty ImagesBest Buy stock’s latest losing streak continues.
Shares of the retailer (ticker; BBY) are falling again on Friday, a day after its mixed fourth-quarter earnings sent the electronics retailer’s stock lower. The results earned it a downgrade from Raymond James. Analyst Bobby Griffin lowered his rating on Best Buy (ticker: BBY) to Outperform from Strong Buy, and cut his target price to $120 from $150.
“We remain believers that Best Buy’s best-in-class fulfillment capabilities, high mix of essential items, and well positioned peer services” can lead to long-term market shares gains, he wrote. The downgrade comes as Best Buy’s valuation has crept up, he noted, and as the company faces difficult year-over-year comparisons.
Best Buy was down 2% to $100.86 in Friday trading. The shares are up 34% in the past 12 months and 1.4% year to date.
Best Buy was a major beneficiary of the Covid-19 pandemic, as people bought plenty of personal electronics to help them learn, work, and entertain themselves at home. However, investors have been skeptical as to how much of that momentum will remain this year. As mass vaccination allows an economic reopening, many consumers will go back to schools and offices, and retailers will have to compete with other leisure options, like travel and dining out, for discretionary spending.
Best Buy itself warned that same-store sales could be flat or lower for the full year as the pandemic fades.
Raymond James’ Griffin noted that the company faces some of the toughest same-store sales comparisons in retail. That means that investors may have to be more patient in finding catalysts for growth. “We believe Best Buy is increasingly becoming a fiscal 2023 story as productivity gains from store closures and fulfillment efficiencies along with greater revenue potential in the higher-margin service business start to take center stage.”
Ultimately he argues that innovation in consumer electronics and the growing importance in emerging areas like telehealth will continue to accelerate when the pandemic ends, bolstering a bullish longer-term view of the stock.
For now, shares may continue to struggle.
Write to Teresa Rivas at teresa.rivas@barrons.com
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February 27, 2021 at 01:27AM
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Best Buy Stock Is Falling Today. Here's Why. - Barron's
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