Research Call: Best Buy Bottomed Out (BBY, RSH, AMZN)

Best Buy Co. Inc. (NYSE: BBY) may have finally seen the bottom.  That is at least what one analyst is calling today.  Today’s rating change shows an upgrade at Citigroup to “Neutral” from a dire “Sell” rating.  This may not sound exactly like a ringing endorsement because “Neutral” is still interpreted negatively by most investors on the way down.

Still, Best Buy has been a battered and tattered story. In some arguments, it might even be in worse shape than the smaller rival RadioShack Corporation (NYSE: RSH).  Just yesterday came a report from Fitch evaluating Best Buy buyout rumors.  Oddly enough, that report was around the possibility of the founder Schulze stepping in to make a go-private offer.

What Citi’s upgrade contained today is a target price upgrade as well to $21 from $18 on the down and out shares.It called the valuation as being near a trough and with only limited downside in the near-term as TV price declines are slowing down.  Long-term issues remain a risk and Citi actually only sees the chance of a buyout as being under 20%.

We would warn that ‘valuation upgrades’ are often the most dangerous sort of upgrades.  Best Buy effectively has a management gap right now and the stores are perhaps the best advertising that Amazon.com Inc. (NASDAQ: AMZN) and other online retailers could have asked for.  That is not likely to change any time soon.

Best Buy’s stock is up 2.2% at $19.84 today and the 52-week range is $17.53 to $32.85; keep in mind that this stock was north of $45 as recently as the start of 2010.  Its shares have also slid from over $27 to under $18 over just the last three months before this most recent recovery attempt.

JON C. OGG