BBY - Embedded Expectations Analysis - 2019 04 09
Best Buy Co. (BBY:USA) currently trades below corporate averages relative to UAFRS-based (Uniform) Earnings, with a 15.9x Uniform P/E. At these levels, the market is pricing in bearish expectations for the firm, and management is concerned about the strength of their customer relationships and experience, their ability to maintain margins, Total Tech Support capabilities, and their senior digital health services.Specifically, management may be exaggerating the strength of their customer relationships, the level of customer engagement across channels, and their ability to provide a unique and diversified range of customer services. Moreover, they may lack confidence in their ability to sustain gross profit margins and operating income rates, manage costs, and meet their financial objectives. In addition, they may be exaggerating the capabilities of Total Tech Support and their ability to sustain membership growth, and may be concerned about vendor partnership expansions and Apple product distribution. Also, they may be exaggerating their competitive advantage in senior digital health services, the value of their lease-to-own program, and their ability to scale GreatCall consumer devices and services. Finally, they may be concerned about their in-store pick-up capabilities, and their Best Buy 2020 strategy results.
Best Buy provides computing and mobile phones, consumer electronics, appliances, entertainment, services and other products. The company operates two reportable segments: Domestic, which is comprised of the operations in all states, districts and territories of the U.S. under various brand names including Best Buy, bestbuy.com, Best Buy Direct, Best Buy Express, Best Buy Mobile, Geek Squad, GreatCall, Magnolia and Pacific Kitchen and Home; and International, which is comprised of all operations in Canada and Mexico under the brand names Best Buy, Best Buy Express, Best Buy Mobile, Geek Squad and the domain names bestbuy.ca and bestbuy.com.mx.
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