Best Buy Co., Inc. (NYSE:BBY) is a Fortune 100® growth company that continually innovates to create superior customer experiences. Through more than 800 retail stores across the United States and in Canada, our employees connect customers with technology and entertainment products and services that make life easier and more fun. We sell consumer electronics, home-office products, entertainment software, appliances and related services. A Minneapolis-based company, our operations include: Best Buy (BestBuy.com), Future Shop (FutureShop.ca), Geek Squad (GeekSquad.com) and Magnolia Audio Video (Magnoliaav.com). We support our communities through employee volunteerism and grants from The Best Buy Children's Foundation.
[Source: Company Press Release]
Reasons to Invest:
This week's DOTW is a retailer that has been on the rebound for a better part of three months. In fact, the stock has been outperforming most of its competition with vigor, rising through a tightly knit regression channel, and using its underlying moving average support as a stronghold for further gains. On top of that, the company just initiated their dividend reinvestment, and direct stock purchase plans.
Without further ado, this week's DOTW is Best Buy Co Inc (NYSE: BBY). Revenues for this retailer rose 15% ($11.56 billion) over the first half of 2004, as net income also increased by 26% ($264 million). The company cited the addition of 75 new stores in the past year, as well as higher same store sales as the reason for the increase in their revenues. Net income figures were noted being higher because of a more profitable sales mix and a less promotional environment.
BBY increased their guidance for third quarter earnings from continuing operations by approximately 19 percent, to $0.41 -$0.47 per diluted share. In the same report, the company reiterated their fiscal 2005 guidance for revenue of approximately $27.5 billion and earnings from continuing operations increasing 15 percent to 20 percent, ranging from $2.80 to $2.93 per diluted share (including a Q2 charge of $0.07 per diluted share for asset impairments, transition costs and the preliminary settlement of pending litigation). The company plans to open 70 new stores during the course of next year, and expects to see a gain in comparable store sales of 4 percent to 6 percent. Best Buy mentioned continued strength in digital televisions, MP3 players, notebook computers, home theater and digital imaging, as some of the primary catalysts for its upbeat revenue outlook.
Earnings per share one year growth rates are forecasted to by around 27.56, while sales percentage growth rates are estimated at being 17.19 over the next year. As is, there is a medium risk rating on new investments in BBY's stock.
Also noteworthy is the fact that BBY ranked in the top 94 percent of its industry over the past 13 weeks of trading. On a year to date basis, Best Buy ranks close to the top 25 percent of its industry.
This consumer electronic giant recently launched their annual "Toys for Teens" drive, where they will be helping U.S. Marine Corps collect gifts for 12-15-year-olds during the holiday "Toys for Tots" campaign. It's easy to understand how this can benefit the company, especially when you take into account that the people that are dropping off donations might also be doing some holiday shopping of their own. Promotion/campaigns like this are generally speaking winning campaigns, and while I have a few things I can donate to teens, I may do some shopping myself. Meaning that I am bumping up their sales, which not only benefits BBY, but it also benefits our hypothetical portfolio.
From a technical standpoint, BBY's chart looks outstanding. Their daily chart notes a gain of roughly 18 points in the past four months. The last week or so of trading has seen some overextended profit taking, but that's to be expected since the stock just nailed the top of its regression channel. While the MACD and Stochastics indicator are on sell signals, I speculate that the underlying 10 and 13 day moving averages will hold as support and we could see BBY retesting their November '03 high of 62.07 in no time at all.
The MACD indicator on the Weekly, Monthly, and Quarterly charts are also on buy signals, while the Stochastics indicator notes the stock on buy signal on the Monthly and Quarterly charts. Ten of the past thirteen weeks have closed in the green (higher). Best Buy has a Point-and-Figure bullish price objective of 95.00.
Should the price objective be hit, we would have made $35.00 on the stock, or an increase of approximately 50 percent of Friday's closing price of 59.73.
The company currently offers a small dividend of $0.44 per share owned per year, which tallies out to a yield of 0.80 percent. What I really like about the company's dividend reinvestment plan is that the minimum initial investment is only $500.00, and the company offers a monthly auto-reinvestment of $50.00. If you are interested in adding BBY to your diversified portfolio, contact (877) 498-8861.
This ends another exciting episode of the DripAdvisor.com Drip of
the Week. Stay tuned next week, as we will spotlight another
stock worthy of the DripAdvisor.com limelight.
Plan your trade, and trade your plan.
Until Next Week,
Editor In Chief
Strong Buy 9
Strong Sell 0
Brokers Covering 27
DRIP Information: (From the company's website):
Direct Stock Purchase Plans
Best Buy has instituted a Dividend Reinvestment Plan and
Direct Stock Purchase Program. For more information, you
may contact EquiServe, our plan administrator.
EquiServe Investment Plan for Best Buy
PO Box 43081
Providence, RI 02940-3081
By Phone: 1-877-498-8861
7601 Penn Avenue South
Richfield, MN 55423
Phone: (612) 291-1000
Fax: (612) 292-4001