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Why Most Analysts Rate Best Buy Stock a ‘Hold’

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Analyst ratings

Best Buy (BBY) is currently rated a “hold” by the majority of analysts covering the stock. As of April 18, Best Buy stock was rated a “hold” by 17 out of 26 analysts. The stock has a “buy” rating from six analysts and a “sell” rating from three analysts. There have been no major changes in analysts’ recommendations since the company announced its fiscal 4Q18 results on March 1. However, several analysts revised their price target for Best Buy stock after fiscal 4Q18 results.

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Revisions to price target

On March 2, Morgan Stanley raised its price target for Best Buy stock to $74 from $66. Wedbush revised its price target to $45 from $38. Telsey Advisory Group raised its price target to $76 from $74. Raymond James also increased its price target to $87 from the earlier estimate of $71. Deutsche Bank raised its price target to $75 from $67. RBC Capital revised its price target to $74 from $72. On March 5, Wedbush again raised its price target, this time to $46 from the prior target of $45. On March 5, Credit Suisse increased its price target to $74 from $60.

The 12-month price target for Best Buy stock is $75.62, which reflects an upside potential of 0.3% compared to the closing stock price of $75.40 on April 18. As mentioned in part one of this series, Best Buy stock has risen 10.1% on a year-to-date basis.

Consensus “hold” rating

Best Buy’s consensus “hold” rating is backed by the positive impact of its turnaround efforts, which helped it recover even during challenging retail conditions. The company continues to streamline its business and focus on growth categories. On February 28, Best Buy announced that it would close all of its remaining 257 stand-alone mobile stores in the US effective May 31. The company is closing these stores as margins in the mobile business have come down and the cost of operating these stores is higher than the company’s big-box stores.

Best Buy has been matching its price with online rivals to fight an intensely competitive environment. The company has also been enhancing its online infrastructure to boost its sales. As discussed previously in this series, the company aims to enhance its revenue through its services offerings and by focusing on growth categories like smart home products.

Competition from online retailers is intensifying and this is likely to be a drag on Best Buy’s performance. However, the partnership with Amazon (AMZN) mentioned in part one of this series, appears to be a smart move, which will likely boost Best Buy’s smart TV sales.

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