Best Buy Stocks Depriciates!

Best buy Inc. stock has depreciated more than 31% since the start of 2014 i.e. year to date. But does it really depict the value of the stock correctly? The turnaround plans for the new CEO have yet not reflected on the company’s financial statements. According to him, they are focusing more on the online retailing segment since they it will help them cut their costs and it’s a part of their new strategy going forward.

According to the CEO their online business expanded around 25% in FY13 as compared to 11% in FY12. Best Buy Inc. stock price has seen lots of losses this year but that’s what makes it one of the most attractive stocks to buy. BBY saw its retail sales decrease in the holiday season and their Net income which was negative in FY12.

But if we forget the past, and look at what the company has planned for the future, then things seem much better than they were a year ago. The company is looking to enhance the experience of the customers by giving them a better user experience of the BBY website. They have recently launched a Renew Blue program that focuses on cost savings and efficiency. The components that they will focus on include expanding the share for online sales, improving the experience of customers by giving them multiple benefits through different retail formats, decreasing merchandising costs by efficiently utilizing store space and etc.

They are spending money on customer orientation which means they want to serve the customer in the best way possible which includes competitive prices, convenience for shopping online, analyzing what the consumer wants by recording his purchase data, and basically facilitating customers at every stage of decision making process.

By looking at their future plans, we believe Best buy shares are trading at much lower price than their intrinsic value and it is only a matter of time when the market will realize the true potential of the company. Majority of the analysts give the company a buy rating realizing the growth prospects.

Best buy share price as of 10^th April is trading at $27.36 down 0.04 percent from last night price of $27.37. If we go back to January 2012, Best buy stock price was trading at $11.81. Since then, BBY shares showed an upward trend and reached at a 52 week high of $44.66 in November 2013. Since then, the stock price has plummeted 39%. Analysts believe the stock price would reach to $34 in the coming 12 months.

Even though since 2012, the Revenues of the company have been declining. But in the same period, they have been able to cut operating costs which is a positive sign for the company. If we look at the data of last five quarters, their Revenues for 1QFY14 were up 34% as compared to a year ago quarter. They were also able to reduce their operating costs for the same period. So their cost reduction plans have already started to impact their financials positively, and moving forward we are much optimistic about the company as it will continue to cut costs and diversify its operations to create new opportunities.