Can Best Buy Regain Its Mojo?

Rolling into the holiday selling season, it’s all about momentum. There will be consumer electronics gadgets under millions of Christmas trees. How much of that sector can Best Buy (BBY.N) capture – or re-capture?

BBY’s 2013 Q3 reported earnings on Nov. 19 posted a 45.2% surprise on a reported EPS of 0.18. Despite earnings performance, the share price dropped from $43.56 to $38.78 and remained lower, closing at $39.07 on Nov. 21. This price change has people questioning if BBY can handle a highly competitive holiday season.

A new strategy will be tested that aims to change the customer experience by diminishing the differences between in-store and online purchasing. Major drivers of this strategy are in-store pickup or in-home delivery options along with a low price guarantee. The 15.1% increase in domestic comparable online sales in 2013 Q3 is a good sign; however, BBY expects this season to be promotionally competitive and isn’t willing to lose share, even at the expense of a negative impact on margins.

StarMine’s Price Momentum Model (Price Mo) shows that Best Buy’s performance in this area outperforms 100% of its peers. It is strong in both its long and short term components, ranking in the 95th and 98th percentiles respectively. BBY’s Price Mo score contributes to a score of 97 on the StarMine Value-Momentum Model (Val-Mo) which measures the tendency of a stock price to exhibit mean reversion combined with momentum signals of the tendency for trends to continue.

Source: StarMine

Other models contributing to the high Val-Mo score are StarMine’s Analyst Revisions Model (ARM) with a score of 95, Relative Valuation Model (RV) with a score of 69, and Intrinsic Valuation Model (IV) with a score of 71.

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