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Category: Stock Market and Best Buy
Date: 21 May 2020 Stock Price: $81.54 We take a look at the 4th quarter earnings release of their 2020 fiscal year of Best Buy, a company that is largely focused on selling consumer electronics. The group saw a significant decline in revenues and their earnings per share compared to the prior year.
Corie Barry, Best Buy CEO. “Our leadership team has been responding to the evolving situation with a focus on keeping our customers and our employees safe while we meet our customers’ needs." |
About Best Buy Co.
Best Buy Co., Inc. is an American multinational consumer electronics retailer headquartered in Richfield, Minnesota. It was originally founded by Richard M. Schulze and James Wheeler in 1966 as an audio specialty store called Sound of Music. In 1983, it was re-branded under its current name with an emphasis placed on consumer electronics. (Wikipedia)
Overview of Best Buy's 4th quarter 2020 earnings report
The data below refers to the latest quarter unless specified:
- Revenue: $8.562 billion (down from $9.142 billion from the same quarter of the previous year)
- Revenue decreased by -6.3% over the last 12 months
- Cost of goods sold: $6.597 billion (up from $6.973 billion for the same quarter of the previous year)
- Cost of goods sold decreased by -5.4% over the last 12 months
- Net income: $159 million (down from from $265 billion for the same quarter of the previous year)
- Diluted earnings per share: $0.61 (down from $0.98 for the same quarter of the previous year)
- Diluted weighted-average shares outstanding: 260.4 million (down -4.1% from 271.5 million for the same quarter of the previous year)
- PE ratio of Best Buy: 33.4
- Cash and cash equivalents: $3.919 billion
- Cash and cash equivalents per share: $15.05
- Cash and cash equivalents makes up 18.5% of Best Buy's current market capital
- Cash and cash equivalents makes up 25.1% of Best Buy's total assets
- Merchandise inventories: $3.993 billion
- Merchandise inventories makes up 25.6% of Best Buy's total assets
- Total stockholders' equity of Best Buy': $3.410 billion
- Shareholders' equity per share: $13.09
- Best Buy is trading at 6.23 times its stockholders equity per share which is outside the expected range of between 2 and 4 times that most firms tend to trade at.
- For some perspective the average price to book value of firms in the S&P 500 is 3.7. Read more about the S&P 500 here.
- Cash generated from operations : $827 million
- Cash generated from operations per share: $3.18
- Cash generated from operations per share: $3.18
Best Buy Co's management commentary on their 3rd quarter 2020 earnings and guidance
MINNEAPOLIS--(BUSINESS WIRE)-- Best Buy Co., Inc. (NYSE: BBY) today announced results for the 13-week third quarter ended November 2, 2019 (“Q3 FY20”), as compared to the 13-week third quarter ended November 3, 2018 (“Q3 FY19”).
“On behalf of all of us at Best Buy, I want to extend our sincere appreciation and gratitude to all those who are on the front lines working to keep us safe or maintain essential services, and we offer our heartfelt sympathy to all those who have lost someone to this virus or who are sick with COVID-19,” said Corie Barry, Best Buy CEO. “Our leadership team has been responding to the evolving situation with a focus on keeping our customers and our employees safe while we meet our customers’ needs.”
“In the middle of Q1, we shifted all our stores to a curbside-only operating model and were able to retain approximately 81% of last year’s sales during the last six weeks of the quarter, even though not a single customer set foot in our stores,” Barry continued. “The strong sales retention is a testament to the strength of our multichannel capabilities and the strategic investments we have been making over the past several years.” Barry continued, “The COVID-19 pandemic has changed the way we work, learn, care for ourselves and, importantly, connect with each other. Against that backdrop, our purpose has never been more relevant: to enrich lives through technology. It is because of that purpose that we were, in virtually every jurisdiction with a stay-athome order in place, designated an essential retailer because of the products and services we offer.”
“On behalf of all of us at Best Buy, I want to extend our sincere appreciation and gratitude to all those who are on the front lines working to keep us safe or maintain essential services, and we offer our heartfelt sympathy to all those who have lost someone to this virus or who are sick with COVID-19,” said Corie Barry, Best Buy CEO. “Our leadership team has been responding to the evolving situation with a focus on keeping our customers and our employees safe while we meet our customers’ needs.”
“In the middle of Q1, we shifted all our stores to a curbside-only operating model and were able to retain approximately 81% of last year’s sales during the last six weeks of the quarter, even though not a single customer set foot in our stores,” Barry continued. “The strong sales retention is a testament to the strength of our multichannel capabilities and the strategic investments we have been making over the past several years.” Barry continued, “The COVID-19 pandemic has changed the way we work, learn, care for ourselves and, importantly, connect with each other. Against that backdrop, our purpose has never been more relevant: to enrich lives through technology. It is because of that purpose that we were, in virtually every jurisdiction with a stay-athome order in place, designated an essential retailer because of the products and services we offer.”
“As challenging as the current situation is, I am certain Best Buy will remain a strong, vibrant company that is well positioned to deliver on our purpose and thrive in a new and different environment. In fact, we have taken the opportunity to accelerate aspects of our strategy as this environment has quickly shifted the ways in which customers interact with retailers,” said Barry. Barry concluded, “I want to take this moment to thank our employees, who have faced immense change with grit, determination and compassion and have helped us shape our approach to safe retailing. Many are working with customers every day, many of whom are also scared, frustrated and, occasionally, hostile in this COVID environment, to ensure they have access to the products and services they need. Others are working tirelessly to maintain a supply chain that delivers with speed and keeps our customers at home, and so many employees are making technical and operational changes every hour from their home offices. None of this is possible without their dedication, and I am truly grateful and feel lucky to be on the team with them.”
Best Buy CFO Matt Bilunas commented, “As a result of the ongoing uncertainty related to COVID-19, we suspended all FY21 financial guidance on March 21 and are not providing guidance today. Our priority has been and will continue to be the safety of our employees and customers while providing essential products and services during this time. We remain thoughtful about managing our profitability and liquidity, balancing our short-term decisions to navigate this unprecedented situation while preserving the elements of our strategy that will ensure we remain a vibrant company in the future.”
Best Buy CFO Matt Bilunas commented, “As a result of the ongoing uncertainty related to COVID-19, we suspended all FY21 financial guidance on March 21 and are not providing guidance today. Our priority has been and will continue to be the safety of our employees and customers while providing essential products and services during this time. We remain thoughtful about managing our profitability and liquidity, balancing our short-term decisions to navigate this unprecedented situation while preserving the elements of our strategy that will ensure we remain a vibrant company in the future.”
Best Buy Co (NYSE: BBY) stock price history
The image below, obtained from Google, shows the stock price history of Best Buy Co for the last 5 years. 5 years ago the stock was trading at around $34.30 and its currently trading at $81.54. That's a 137.7% return provided to Best Buy stockholders over the last 5 years.
The stock of Best Buy is trading at a lot closer its 52 week high of $91.99 than it is to its 52 week low of $48.10 which to us is a clear indication that the short sentiment and momentum of Best Buy's stock is positive.
The stock of Best Buy is trading at a lot closer its 52 week high of $91.99 than it is to its 52 week low of $48.10 which to us is a clear indication that the short sentiment and momentum of Best Buy's stock is positive.
Recent Google searches for BBY stock price and Best Buy stock price
The graphic below shows the trend in Google searches for BBY stock price and Best Buy stock price over the last 12 months in the United States as obtained from Google trends. Clearly searches for Best Buy stock price is far more popular than that of BBY stock price. One can see a surge in searches for Best Buy stock price in early to middle March 2020 which coincides with a decline in its stock price.
Best Buy Co. (NYSE: BBY) stock price compared to that of Target (NYSE: TGT) stock price
The image below shows the stock price performance of both Best Buy Co (BBY) and Target (TGT) over the last 3 years. And from the image it is clear that the stock of Target (TGT) has easily outperformed that of Best Buy over the last 3 years. Over the three year period the stock of Best Buy increased by 37% while the stock of Target increased by 115%. If you had to choose between these two stocks 3 years ago we hope you picked Target (TGT)
Recent coverage of Best Buy Co.
Below an extract of coverage on Best Buy as obtained from Fool.com (18 May 2020)
What happened
Shares of Best Buy (NYSE:BBY) have jumped today, up by 10% as of 1 p.m. EDT, after the company received an upgrade from Wall Street. Telsey Advisory Group boosted its rating from market perform to outperform.
So what
Telsey analyst Joseph Feldman believes that Best Buy has handled the COVID-19 pandemic relatively well, especially when compared to other retailers. At the same time, the wholesale shift to remote work at many companies is driving demand for consumer electronics necessary to work from home, such as laptops and webcams for videoconferencing.
Read the full article here
What happened
Shares of Best Buy (NYSE:BBY) have jumped today, up by 10% as of 1 p.m. EDT, after the company received an upgrade from Wall Street. Telsey Advisory Group boosted its rating from market perform to outperform.
So what
Telsey analyst Joseph Feldman believes that Best Buy has handled the COVID-19 pandemic relatively well, especially when compared to other retailers. At the same time, the wholesale shift to remote work at many companies is driving demand for consumer electronics necessary to work from home, such as laptops and webcams for videoconferencing.
Read the full article here
Best Buy Co. (NYSE: BBY) latest stock valuation
So what are Best Buy stock worth based on their latest earnings report ? Our valuation models provide a target price on Best Buy stock of $77.40 (down from our 3rd quarter 2019 earnings report valuation of Best Buy). We therefore believe the stock of Best Buy is overvalued at its current price.
We usually recommend that long term fundamental and value investors look to buy a stock at least 10% below our target price (full value price) which in this case is $77.40. We therefore believe a good entry point into Best Buy is at $69.70 or below.
We usually recommend that long term fundamental and value investors look to buy a stock at least 10% below our target price (full value price) which in this case is $77.40. We therefore believe a good entry point into Best Buy is at $69.70 or below.
Next earnings release of Best Buy
It is expected that Best Buy will release their 1st quarter 2021 earnings report in mid August 2020