Recent price: 29.35$
P/E Ratio: 9.41
3 Months Target Price: 35$
Company Description
According to data provided by Reuters, Best Buy Co., Inc., incorporated in 1966, is a multinational retailer of consumer electronics, home office products, entertainment software, appliances and related services. The Company operates retail stores and call centers and conduct online retail operations under a variety of brand names, such as Best Buy (BestBuy.com, BestBuy.ca), The Carphone Warehouse (CarphoneWarehouse.com), Five Star, Future Shop (FutureShop.ca), Geek Squad, Magnolia Audio Video, Napster (Napster.com), Pacific Sales, The Phone House (PhoneHouse.com) and Speakeasy. It operates in two segments: Domestic and International. The Domestic segment is consisted of the operations in all states, districts and territories of the United States, operating under various brand names, including, Best Buy, Best Buy Mobile, Geek Squad, Magnolia Audio Video, Napster, Pacific Sales and Speakeasy. The International segment is consisted of all Canada operations, operating under the brand names Best Buy, Best Buy Mobile, Future Shop and Geek Squad; all Europe operations, operating under the brand names The Carphone Warehouse, The Phone House and Geek Squad; all China operations, operating under the brand names Best Buy, Geek Squad and Five Star; all Mexico operations, operating under the brand names Best Buy and Geek Squad and all Turkey operations, operating under the brand names Best Buy and Geek Squad.
Confidence Margins
Strong resistance $45.63 (+55%)
Light resistance $32.98 (+12%)
Light support $28.65 (-2%)
Strong support $25.00 (-15%)
Recommendation
The company provided a revenue guidance for the year 2011 on march 24th that was better than what analysts were expecting. It is interesting to note that Best Buy Co. Inc is showing incredibly low valuations, the current stock prices assumes that there will be dismal if no sales growth for the years 2011 and 2012. There has also been a lot of downgrades from many prominent forms. What matters to us is that the stock is currently sitting at prices unseen since the last days of the bottom of the financial crisis in April 2009. This is a great entry point.
Entry strategy
For the cautious investor:
Buy the stock for 31$ or less.
For the risk-taking trader:
The June 2011 30$ out-of-the-money call option contract seems to be the right position to take, they can be acquired for about 135$ per contract.
Exit Strategy
For the cautious investor:
Sell when the stock reaches 35$, or keep it until 40$ if you are more bullish in your own analysis. It is highly recommended to keep the position on check if it goes sour.
For the risk-taking trader:
The contracts should be kept until the underlying reaches around 35$. This should provide a satisfactory return if the underlying reaches the target price as the contracts will get in the money.
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