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
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