Best Buy Co., Inc. (BBY) Is a Great Buy

Macro environment is favorable

While fears of an economic slowdown has certainly dissipated over the past few months, Best Buy can continue to thrive in this type of environment. The company’s earnings stream is very season in nature, approximately 75% of annual profits are earned in Q4 during the holiday season which is encouraging as the economic data continue suggesting positive steps forward. In fact, U.S households’ net worth rose $3 trillion to reach $70.3 trillion in the first quarter of the year, the biggest quarterly gain since late 1999.

Hard to stay one step ahead of competition

Best Buy’s moves will shore up its competitive position, but the firm’s competitors will engage in their own strategies. Target Corporation (NYSE:TGT) has implemented an identical matching policy to compete against Best Buy Co., Inc. (NYSE:BBY) and curb against “showrooming.” Target Corporation (NYSE:TGT) also is a one-stop shop, selling many of the same electronics that Best Buy does, in addition to a wide variety of other products, such as food and furniture.  Target Corporation (NYSE:TGT) maintains its long-term goal of hitting $100 billion in revenue by 2017 and generating EPS of $8 per share. Aggressive expansion into Canada may make these seemingly unrealistic targets a possibility.  Investors can jump in now while the shares are still cheap compared to what they will be once the Canadian expansion is complete and the company is ready to start looking elsewhere to expand.  A recent dividend hike also provides investors a reason to cheer, with the quarterly dividend increased 19% to $0.43 per share.

Nonetheless, Target remains an attractive investment. Its price-matching guarantee will certainly help the bottom line, but at the end of the day, Target’s core business is not electronics, while Best Buy remains a specialty retailer with better trained, more proactive employees.

Conclusion

Best Buy Co., Inc. (NYSE:BBY)’s forward P/E of 11 is below its historical mid-teen highs, which leads me to believe the company has room to continue growing and continue in its turnaround. I remain optimistic on the company and believe that a revamp of both online and offline venues, done properly, can continue driving the shares higher.

The article Best Buy Is a Great Buy originally appeared on Fool.com and is written by Jayson Derrick.

Jayson Derrick has no position in any stocks mentioned. The Motley Fool recommends Amazon.com. The Motley Fool owns shares of Amazon.com. Jayson is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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