Best Buy Co. Inc. (NYSE: BBY) is set to report its earnings on Tuesday morning.  The company has the earmarks of a value stock now that shares have sold off so much.  The problem is that it has really just been acting like a value trap.  Its problems are not as bad as RadioShack Corporation (NYSE: RSH), but Amazon.com Inc. (NASDAQ: AMZN) is perhaps the biggest problem.

Take a look at any chart and you will see that Best Buy shares hit a low not seen since back in 2009 when every stock tied to retail and technology had hit the ‘free fall’ button.  This stock hit a low of $17.53 this morning and its prior 52-week range was $17.84 to $32.85.

Somehow Amazon remains the winner here.  Many buyers go to Best Buy to interact with consumer electronics and then turn around and buy the item online from a competitor to avoid sales tax and/or to pay a lower price.

Analysts still have a consensus price target around $25.00 for Best Buy, but for now that should not be trusted.  And what about that $3.59 EPS target for this year at Best Buy from Thomson Reuters?  Or the $3.72 EPS target for next year from Thomson Reuters?  If those were to remain true then Best Buy trades at only 5-times this year’s earnings and under 4.9-times next year’s earnings estimates.

The reality is that Best Buy has no CEO, it lost its founder, it is suffering from margin compression, and it is often cited as losing more and more of the potential customer base. BB&T Capital Markets also downgraded Best Buy shares to Hold from Buy just this morning, although admittedly that is just a very late downgrade.

The one thing which may actually act as a slingshot on any news that “lass bad” is that Best Buy has close to 54 million shares in its short interest per the most recent data.  It is hard to get excited that short sellers may drive up the price if the news is not just dismal.

JON C. OGG

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