Best Buy Reaction Could Be Tell On Change In Sentiment

June 16, 2009 at 10:36 am  ·  Category: Macro Economics, Market Commentary, Sentiment Analysis, Stocks

But the bigger issue is sales.  Comparable store sales were down 6 percent compared to the same period last year.  True, the stimulus checks handed out last year have created difficult comps for retailers this quarter, not to mention the economic troubles.

So why is the stock down nearly 7 percent today?  There seems to be a change of sentiment going on–it seems that sales trends are becoming more of the main driver of stocks rather than earnings beats, which are based primarily on cost cuts.

“Best Buy Beats And Yet Disappoints”, Bob Pisani, Trader Talk, June 16

The reaction to Best Buy’s (BBY) earnings report this morning could be a tell.  As Bob Pisani writes, for the last three months better than expected earnings on weak sales and cost cutting were good enough to move stocks higher.  But not with Best Buy today.  This same kind of report would have generated a pop last month but today it’s resulted in a 7% selloff on heavy volume.  As always, it’s about psychology and the reaction here is different than it has been the last three months while the fundamentals remain the same.

Best Buy reported adjusted EPS of 43 cents handily beating analyst estimates of 34 cents.  US same store sales were down 4.9%.  They maintained guidance of $2.50-$2.90 EPS for the year ending next February.  That’s about a 13 forward multiple based on the current price.

bby-6-month-chart

Disclosure: Top Gun is short shares of Best Buy (BBY).

Posted by Greg Feirman  ·  Trackback URL  ·  Link
 

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