Best Buy To Have A Tough Holiday Season: Wedbush

Best Buy Co., Inc. (NYSE:BBY) continues to struggle, and analysts at Wedbush think things will only get worse. They maintain their Underperform rating. However, they did double their price target from $9 to $18 per share, citing 40% market appreciation since last year and “far better management execution” than they expected.

Best Buy To Have A Tough Holiday Season: Wedbush

Best Buy holiday comps coming Jan. 10

Analysts Michael Pachter, Nick Citrin and Nick McKay note that Best Buy is expected to report a holiday comp on Jan. 10 before opening bell. They expect that the holiday shopping season will be especially difficult for Best Buy Co., Inc. (NYSE:BBY). The analysts said the retail chain “appears determined to deliver a positive comp” at the expense of margins. They saw major discounts over Black Friday weekend, and Best Buy has continued to offer promotions.

When Best Buy posts its comps on Jan. 10, they’re expecting to see domestic same store sales growth of around 1.5%, largely thanks to new console launches, promotions and positive comps in mobile phones, appliances and entertainment.

Estimates from consoles, accessories at Best Buy

Their checks suggest that Best Buy stores received less than 10% of the newest gaming consoles, the Xbox One and the PlayStation 4. That’s less than the 15% they used to receive. They think those launches will add about $200 million in sales.

The Wedbush team believes Best Buy Co., Inc. (NYSE:BBY)’s share of accessories will continue its shift to, Inc. (NASDAQ:AMZN), especially as the site grows membership in its Amazon Prime service. They believe Prime members total between 15 million and 17 million in the U.S. and that it shifts behavior to use Amazon more like a convenience store for purchases like batteries, printer cartridges, phone chargers and other accessories.

Best Buy: a great showroom?

Interestingly enough, when I visited one of my local Best Buy stores, there was a sign saying something to the effect of “The Best Holiday Showroom,” or something like that. I just remember seeing the word “showroom,” which is ironic because the retail chain is battling a concept known as “showrooming.” This idea involves going to Best Buy to play with the electronic toys they have on display and then going home to order them on Amazon because they are cheaper.

Personally, I think it would make sense for Best Buy Co., Inc. (NYSE:BBY) to recast itself as a showroom for electronics products and make most of its money by charging companies to have their products on display for people to try out. Selling those products could become more of a side business for those who still like to buy in a brick and mortar store even though it often costs more. Maybe the retail chain is heading this way with its internal Samsung and Microsoft boutique shops, but who knows? Perhaps the sign I saw was just an ironic but poor choice of words.

As of this writing, shares of Best Buy Co., Inc. (NYSE:BBY) were down nearly 3%.