I've been following retailer Best Buy (BBY)
for several years. I always liked the logo, the store and
their clean aggressive business model.
But I'm surprised that the stock has even held up as well as it
has given the market declines. A year ago, earnings
expectations were more than $4 and now the current year's guidance
is at $2.60 with the next fiscal year being a question mark.
Best Buy is talking about significant cost reductions next year and
their balance sheet has deteriorated, despite promising a slightly
higher dividend of .14
Cash and investments are at about 600M while long term debt and
liabilities are at 2.1 billion. Short term debt is another
2.1 billion. A year ago, those numbers were very
different. To make the long story short, their balance sheet
has gone from good to bad and rating agencies have downgraded their
debt ratings.
So with the holiday quarter dropping 80% year over year based on
their guidance in mid December, if we apply that kind of
performance to the next fiscal year we get 80% of $2.60 is
$2.08. Analysts expect $2.32 (90 days ago they expected
$3.52).
It's difficult to compare Best Buy to other companies since so
many direct competitors are not making any money.
But the bottom line is if we consider the stock price ($29) plus
all the debt ($10) divided by the earnings estimate of $2.32 - that
leaves an earnings multiple of 16.8
16.8 in this market seems rather high, and Best Buy employees
I've talked to are telling me this year's holiday was significantly
weaker than last year.
I think Best Buy's lack of FY10 guidance…
