Best Buy Co Inc (NYSE:BBY) is expected to release its earnings on Wednesday and with it being down more than 15% in the past year, investors may be wondering if now is a good time to buy the stock.
Last quarter, the company beat expectations when its bottom line grew by 16% despite sales only rising by 3%. This upcoming quarter, Best Buy is going to be reporting on its busiest season of the year and with Christmas sales being very strong in 2018, that could be a good sign that the company might also see a strong performance.
However, the part that keeps me skeptical about betting on Best Buy is that while the economy might be doing well, that doesn’t mean brick-and-mortar stores are. And with Amazon continuing to dominate, it’s always going to be an uphill battle for Best Buy to wrestle away market share from the online retailer.
And although Best Buy had a good beat last quarter, that hasn’t been typical for the company. In the four previous quarters it missed earnings twice, and the two times that it beat were both by narrow margins.
While Best Buy might trade at a reasonable multiple to earnings (16), there’s simply much more downside risk than there is upside for the stock to be a good bet on earnings day. Even if Best Buy outperforms expectations, I’d be surprised to see much of a boost in stock price as investors will likely be hesitant about its long-term future.
And with sales struggling over the years, Best Buy is just not the company it once was and that’s why it doesn’t make for a good investment today.
Related Stories
