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Best Buy Co., Inc. Message Board

  • reitdude42 reitdude42 Feb 27, 2013 11:12 AM Flag

    Do the math...

    ...steffenhilgemann already did most of the work for you.

    $150M in SG&A cuts yields $0.285 in incremental EPS after-tax.

    Prior to the announcement, BBY closed at $17.00. It's 2014 EPS estimate was $2.17 or a P/E multiple of 7.8x.

    Applying its 7.8x multiple to the added EPS from the cost savings yields a warranted share price increase of:

    $0.285 EPS x 7.8 = $2.22.

    Warranted stock price following the first tranche of SG&A reduction = $17.00 + $2.22 = $19.22

    The only reason that the stock is not trading to this level is all the news about Schulze not being able to gain support for his make-believe privatization.

    That should've never been a catalyst for the stock.

    The real catalysts for the stock that people are ignoring are:

    * a new management team that has already been rewarded with numerous upgrades from Wall Street research firms - not maligned by internet trolls
    * 4Q earnings that will show a stabilization in domestic same-store sales
    * execution of additional cost savings that will total $750M or $1.40 of incremental annual after tax EPS
    * multi-channel distribution capabilities that yield $50B in annual sales
    * the implementation of price-matching that will end the practice of "showrooming" - margins will compress but sales volumes will increase
    * rationalization of unprofitable big box stores (64 are expected to be closed with ROICs less than 10%and opening a multitude of smaller more profitable mobile stores (439 today up from 8 in 2007)
    * the national rollout of the Marketplace Fairness Act thereby eliminating the unfair tax advantage of internet-based retailers (BBY saw a 4-6% increase in sales in states that forced AMZN to collect state sales tax. Currently only 8 states force AMZN to collect sales tax.)
    * Unilateral pricing policies (UPP) announced by Samsung, Sony, LG, Panasonic, and Sharp set fixed prices for which brick-and-mortar and online retailers are allowed to sell certain products. Undercutting of prices will not be tolerated.

    THESE are the catalysts! Not some old man whose pride was hurt when he was let go as the Chairman.

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BBY
32.24+0.55(+1.74%)Aug 28 4:02 PMEDT

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