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Gauging the Upward Movement in Best Buy’s Stock in 2016

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Stock movement in 2016

Best Buy’s (BBY) stock has appreciated 5.9% since the start of 2016 to $32.47 as of April 25. The company’s stock has appreciated 0.7% since the announcement of its 4Q16 results in February 2016. Best Buy exceeded analysts’ expectations for 4Q16, which ended January 30, 2016.

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Comparison with peers

Best Buy competes with other specialty retailers like GameStop (GME), Aaron’s (AAN), and Conn’s (CONN), all of which sell consumer electronics as well as other products. The First Trust Consumer Discretionary AlphaDEX Fund (FXD) has 1% exposure to Best Buy.

Best Buy’s stock has underperformed GameStop and Aaron’s, which have appreciated 15.9% and 14.6%, respectively, year-to-date. As of April 25, Conn’s has fallen by a significant 34.9% since the start of the year, primarily reflecting the impact of the company’s 4Q16 earnings miss.

Recap of fiscal 2016 performance

Best Buy’s fiscal 2016 sales fell 2% to $39.5 billion. This compares to a 0.7% decline in revenue in fiscal 2015. Best Buy’s revenue decline in fiscal 2016 was due to lower International segment revenue caused by currency headwinds and the negative impact of Canadian store closures.

In fiscal 2016, Best Buy’s adjusted EPS (earnings per share) rose 6.9% to $2.78. Fiscal 2016 adjusted EPS excluded the impact of one-time items like the charges relating to the Canada brand consolidation and restructuring charges. Best Buy has made a notable recovery with the help of its Renew Blue transformation plan. However, a tough business environment and intense competition from online retailers like Amazon (AMZN) have been adversely impacting the company’s position.

In this series on Best Buy, we’ll discuss the company’s sales growth prospects in the current fiscal year, the company’s online business, analyst recommendations, and an estimation of the potential movement in the company’s stock as well as its valuation.

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