UBS Raises Price Target on Best Buy (BBY) Following Solid 2Q
UBS reiterated a Neutral rating on Best Buy (NYSE: BBY), and raised the price target to $38.00 (from $33.00), following the company's 2Q earnings report. Appliances comped up 8.2% and now represent 9% of BBY’s TTM sales. Also, its eComm growth of 24% was above the 20% mark for the second quarter in a row, showing it can hold its own through this channel.
Analyst Michael Lasser commented, "The narrative around BBY has been evolving, but this Q added credibility that it's on a sustainable turnaround. Its comp spread vs. the industry (as defined by NPD) widened to 400 bps. This marked a reversal from the diminishing gains over the last 2 Qs. The read is BBY’s path is more in its own control than the market gives it credit for since it only trades at 11x-12x our ’17 EPS. Though, we aren't sure it will ever get a premium valuation given the competitive intensity of the industry, commodity nature of the category, scale of price deflation of the products, & concentration of the vendor base. Though, BBY has repeatedly & consistently shown it isn’t being slowed by these factors."
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Shares of Best Buy closed at $39.23 yesterday.