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Best Buy Inc's price target is raised to US$65 by Wedbush analysts

Published: 10:31 24 Aug 2018 EDT

Best Buy store
Wedbush analysts still have doubts and have tagged Best Buy with an Underperform rating

Analysts at Wedbush have raised their price target on Best Buy (NYSE:BBY) to US$65.00, saying they have been "consistently wrong" about the consumer electronics group and that it may have the "right formula" for long-term growth.

While Wedbush analysts still have doubts about the popular retailer and are still tagging Best Buy with an Underperform rating, they have moved to increase its stock target from US$48 in light of the company’s “excellent execution and consistent share repurchases.”

Wedbush expects Best Buy, which reports earnings next week, to reiterate its full-year comp guidance.

But having adopted a skeptical view, Wedbush analysts Michael Pachter, Alicia Reese and Matthew Breda also forecast that the retailer will not see growth in the second half of 2019 and extending into 2020 due to the compression of pricing, worsening mobile phone sales and little innovation in televisions.

Read: Wedbush maintains Underperform rating for Best Buy, calls Amazon smart TV deal a Trojan horse

Taking into account Best Buy’s US$800mln cash acquisition this month of Great Call, which sells mobile phones and other devices to senior citizens, Wedbush is adjusting its full year 2019 estimates for revenue to US$42.1bn from US$42bn and for earnings per share to US$5.02 from US$5.05.

The changes to the forecast reflect the higher revenue and expenses stemming from the GreatCall acquisition and fewer share repurchases than previously estimated.

For its fiscal second quarter, Wedbush is forecasting earnings per share of US$0.86 for Best Buy on revenue of US$9.24 bln.

While Wedbush analysts question whether Best Buy can achieve revenue and operating margin growth substantial enough to meet its 2021 earnings per share target of US$5.50 to US$5.75, they acknowledge that its management has “consistently executed throughout various challenges over the past several years”.

Best Buy shares lost 1.26% in afternoon trade to hover at US$81.54.

 

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