Best Buy stock surges
The stock price of consumer electronics retailer Best Buy (BBY) rose 3.6% on April 18 following news of a partnership with Amazon (AMZN) to sell televisions that have Amazon’s Fire TV system built in. Beginning this summer, Best Buy plans to launch over ten 4K and HD Fire TV Edition models from Toshiba and Best Buy’s in-house brand Insignia. Through this partnership, Best Buy will become the exclusive retailer to sell Fire TV edition smart TVs.
Best Buy has delivered total returns of 10.8% on a YTD (year-to-date) basis as of April 18, 2018. Specialty retailers GameStop (GME) and Aaron’s (AAN) have generated total returns of -21.8% and 21.1%, respectively, on a YTD basis. In comparison, the YTD return of the S&P 500 Index is 1.9%. The S&P 500 Index has been volatile due to several factors recently including military action against Syria and concerns surrounding the US-China trade war.
Total returns (or total shareholder returns) include a company’s stock price movement and dividends paid over a certain period. Best Buy stock appreciated by an impressive 60.5% in 2017, outperforming the 19.4% rise in the S&P 500 Index. As of April 18, 2018, Best Buy stock has risen 10.1% since the start of the year, better than the 1.3% rise in the S&P 500 Index. The company impressed investors with continued improvement in its top line driven by its turnaround efforts. The company’s stock rose 3.9% on March 1, as it beat analysts’ revenue and earnings expectations for fiscal 4Q18.
On March 1, Best Buy announced a 32% rise in its quarterly dividend to $0.45 per share. In fiscal 2018, which ended on February 3, 2018, the company returned $2.4 billion to shareholders, of which $2.0 billion was returned through share repurchases and $409 million in the form of dividends. As of April 18, Best Buy’s dividend yield was 2.5%. In comparison, the dividend yields of GameStop and Aaron’s were 10.9% and 0.2%, respectively, as of April 18. Share repurchases enhance a company’s earnings per share by reducing the average shares outstanding. The company intends to repurchase at least $1.5 billion of shares in fiscal 2019.
In this series on Best Buy, we’ll discuss what analysts expect from the company’s revenue and earnings. We’ll also discuss the company’s initiatives to improve its top line. The series will also look at the company’s margins, valuation, and analyst recommendations.