Best Buy Co., Inc. (NYSE:BBY) is currently one of the more popular stocks that has been heavily discussed to date, partly due to the buzz generated by a possible buyout courtesy of businessman Richard Schulze. However, this news is hardly encouraging for traders who own or wish to purchase stock in the company, as Best Buy may go private at a price ranging from five to six billion US dollars, which is just about half of what it was originally worth. Still, it has been one of the global leaders in sales of consumer electronics, with over 1,400 stores, around 170,000 employees, and $50 billion in yearly revenue at one point. So is Best Buy a good buy?
Best Buy’s Current Financial State
In the several weeks prior to the close on Jan. 5, the company had only reported revenue of $12.8 billion, which is a significant drop from the $12.9 billion it earned a year prior. On the plus side, the company did register domestic sales of more than a billion dollars, which increased 10% from the previous year, although this may not be enough to free up resources to recover. Best Buy was looking forward to boosting cash flow to $1.05 billion come year end from $850 million, but this early on, the target was reduced to a more modest and attainable $500 million.
Shares from the company hit $14.67 for the Jan. 17 trading day, which was a gain of $0.25 from the preceding trading day. Volume of trading was at 6.92 million, and the stock managed to stay afloat almost 31% higher than its fifty-two week low of $11.20. In the past twelve months, Best Buy generated $49.54 billion in revenue, but did not actually make a profit. Earnings were pegged at -0.34 in terms of net profit, and operating margins were a paltry 0.7%.
What's On The Other Side
Meanwhile, Best Buy competitor Amazon.com, Inc. (NASDAQ:AMZN) is doing brisk business. The online shopping site also offers many of the same products you would normally see in Best Buy, but with the added convenience and reduced prices not found in the latter’s brick-and-mortar superstores. The company currently has an almost 40% advance in 2012 earnings compared to the year before, and was given an “outperform” rating upgrade from a mere “sector perform.” Sales have also been consistent for the past half-decade, with annual sales increases ranging from thirty to forty percent, so the growth prospects Amazon has are still positive, giving its stock high valuation and earning potential.