Does Best Buy Co Inc (NYSE: BBY) Have Further Upside Potential?

December 13, 2017, 16:45 pm ET, BY Simon M.- Contributor| Editor: Thomas H. Kee Jr. (Follow on LinkedIn)

Best Buy Co Inc (NYSE: BBY) stock has recently demonstrated strong upward momentum after the release of its third quarter results on November 16. The company’s latest quarterly report indicated that its earnings per share came in at 0.78 versus the expected 0.79. However, the company’s stock continued to rally higher despite the slight miss.

Article Summary

Best Buy Stock has rallied higher in the recent past.

The company seems to benefiting from macro improvements in the US economy.

The cost-cutting measures implemented by the company are bearing fruit.

Here’s the trading report on BBY.

A closer look at Best Buy’s fundamentals reveals that the company has implemented an Omni channel sales strategy, which incorporates both online sales channels as well as in-store sales. The company reported double digit growth in online sales over the third quarter of fiscal 2018 as the number of customers shopping online increased.

The company is also backed by positive macro trends in the US, which is its core market, given the rising consumer sentiment in the country. The US economy is experiencing a significant recovery, which has led to low unemployment levels as well as higher disposable incomes among most consumers. These trends are working in Best Buy’s favor as the company reported significant growth in US sales.

The company has also implemented a cost-cutting strategy that led to a reduction in costs of about $1.4 billion over the past five years. The company also announced the extension of cost-cutting measures up to 2023 with the company aiming to cut at least $600 million in costs over the next five years.

Given that the fourth quarter is a seasonally strong period for retailers such as Wal-Mart Stores Inc (NYSE: WMT) and Target Corporation (NYSE: TGT) among others, Best Buy is likely to benefit from higher consumer spending over this period. Best Buy has an advantage over other general retailers as it exclusively stocks consumer electronics as compared to the other retailers who sell different categories of goods.

The company’s stock price was in a consolidative state for most of the summer, but it appears to have recently broken out of the sideways range and might be headed higher. The question on most investors’ minds is whether the breakout shall be sustained into the future.

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