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Best Buy Co., Inc. Message Board

  • kirilandrei kirilandrei Jan 11, 2013 7:34 PM Flag

    advice from regular investor

    You guys should realize that stocks have two kinds of values. Real values and wall st values. I love bby stock because it's very cheap. pe is 6-8 if that. decent balance sheet. good company name. but you should be very careful from wall st. stock price is around 14 now which wall st hates. they could bring down the price. remember to hedge yourself with covered calls. but that cover could wipe out your handsome return when the deal goes through so be careful. if the stocks goes back to 12 or esp to low 11, buy as much as you can and you hold on to it.

    Sentiment: Strong Buy

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • if there is a buyout, real value for buyers is ability of NEWCO to service debt and ROE to buyers, not on PE of OLDCO

      market goes crazy because sales only fell 1% instead od 2-4% and internet sales(some of which may have been cannibalizing brick & mortar sales) go up 10% from a small base.

      @$20 a share new investors will need to raise almost $7b and assume $1b of existing debt. We already know suppliers are cutting terms(I know mgt said because of new products-yea sure) so why would they support NEWCO with leverage and assets pledged and lines utilized. This also supposes banks agree to lend $3-4b to a company with declining cash flow. Adding to the mix is competitors now saying price matching is a year round event!

      PE of OLDCO is irrelevant to a leveraged buyer. It may be important to a strategic buyer who has synergies with their existing operation. PEGs look for debt service capacity & IRR. If NEWCO has poor debt capacity which may be exaserbated by lower AP, then they have to increase equity and lower their return horizons.

      Finally, why would anyone trust the old man with $6b(he would need to rollover his $1b) if he failed to effect a turnaround over 4 years and was at the helm when the market cap went from $12b to $4b? On top of that he wants to bring back his "dream team" and he was fired(resigned) for withholding information to the Board(trivial info yes, but....)

      I think a buyout occurs at a much lower number unless it is strategic. The lower number needs to be modeled around debt capacity. What if BBY today added $4b in debt--could it pay interest,principal and dividends and would suppliers ask for shorter terms or lower credit lines?

      I believe this might get done @ $10-12 for an LBO & $15-17 by a strategic buyer.

      Sentiment: Sell

      • 1 Reply to lorrainepro
      • This post says it all. Lorraine, you hit the nail on the head when you stated: "Why would anyone trust the old man with $6B..."

        He was the problem, he is not the solution. Hopefully a PE will come out soon and make it clear they are not interested in a group that includes him. Your evaluations are dead on. A fundie who offered a $20/share buyout would be an idiot.

        Sentiment: Strong Sell

    • I love posts by people like kiril who believes just because their assets exceed their liabilities they're good. Why don't you check Circuit City's balance sheet before their BK, same Asset/Debt ratio. It's a Dinosaur and clock is ticking. They need to get into special financing like Conn's to save themselves.

      Sentiment: Strong Sell

    • You can look at Dec 13 and see how this ends.

    • No way this goes back to $11's or even low $12's before Feb. UNLESS we get one of those Star Tribune reports that PE has backed out. Otherwise, it'll trade within a range until February. Up and down, as always. Obviously we could - and will - see some selling / lower prices over the next two weeks. I'm counting on it. No matter what happens on Monday - up or down - we'll see the mid-$13's again at some point in the next week or so. I'll close my short (covered) calls when we do. Today was certainly overdone. $11.30 to $14.30 in 2 days? Welcome to Wall Street. lol.

    • Sitting on $16 jan calls $.01 and febs @ $.11 right now and loving every minute of it, if Schulze pulls the trigger this weekend or even next week, I Retire.

      Sentiment: Strong Buy

 
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