BestBuy Co. released Q2 financials this morning. Analysts, yes those famous analysts, estimated an EPS around 0.52 for the Q2 financials but best buy “missed” those wonderful analysts target and provided EPS at 0.47. Big headlines are now popping everywhere : “Best Buy cuts forecast as profit falls 30%!“, “Best Buy 2nd quarter net income drops” and Mr.Market reacts by dropping BBY price by 5.89% (at 9:46AM).
Is it overreacting? I do think so. BBY estimated EPS at year-end is now 3.35 to 3.65. At the current price (23.49) this gives and P/E ratio from 7 to 6.43 with a dividend yield of 2.5%. It is an incredible valuation for a multi-billion dollar company at a P/B of around 1.3. The downside protection is high with cash and inventory counting up to 11B dollars on a market cap of 8.7B.
Best Buy Co. said Tuesday that its fiscal second-quarter profit dropped 30%, as the No. 1 U.S. electronics retailer was hurt by increased promotions and declining sales of televisions, digital cameras and video games. It was compensated by growth in all other sectors (mostly tablets).
Best Buy sales estimate by store remain on target from flat to 3% drop.
Reaction is human. Overreaction is human too.
Stay calm or buy in!
Disclosure : Author has a position in BBY.