UBS Cuts Target on Best Buy (BBY) Ahead of Q3, Sees Smaller Black Friday Promotion Assortment
November 19, 2012 4:00 PM EST
UBS cut its price target on Neutral-rated Best Buy (NYSE: BBY) from $16.75 to $14.50 ahead of Q3 results due tomorrow.
"A lot of the mystery has been taken out of BBY's 3Q given its preannouncement and recent investor meeting," the analyst notes. "The focus will be on how the company is positioned for the holidays and recent trends. We are forecasting a -2% domestic comp and -85 bps of domestic GM erosion in 4Q, but a wide range of outcomes is possible, especially with BBY's new price match policy in place."
UBS said a detailed analysis of BBY’s Black Friday shows that across Computers, HDTVs, Cameras and Appliances company reduced the number of featured products from 143 items last year to 61 items this year. However, the discounts are greater this year, they said. "Interestingly, only 3 HDTVs are discounted vs. 29 last year," the analyst said.
UBS notes that shares have been under pressure recently as questions grow larger about whether Schulze can attract enough investors to finance his bid. "His due diligence likely began in mid-September meaning the standstill agreement expires about now. The likely next step would be Schulze asking for a 30-day extension for the bid. The volatility is likely to persist, but it appears the shares are approaching a near-term floor."
The firm expects choppy valuation until LBO talk/holiday spend become clearer.
For an analyst ratings summary and ratings history on Best Buy click here. For more ratings news on Best Buy click here.
Shares of Best Buy closed at $13.75 yesterday, with a 52 week range of $13.52-$28.53.
I think UBS has problems seeing anything. "Smaller Black Friday Promotion Assortment" is like comparing apples to oranges. I see that BBY has good prices and relatively low competition from other retailers in products they have on sale. They limited "assortment" to only attractive products, while increasing its BF stock and getting better margin deals with suppliers for only those limited products. That is retail 101, and I can only see satisfied customers as a result of it and increased profit. When angry customers finish shopping at Walmarts and alike, they will go to a BBY and will be very happy for making that trip.