nothing on earnings.. but finally some optimism.. read on:
Briefing.com take on BBY
Several weeks ago, Briefing.com issued a Stock Brief in which we noted that strong holiday sales of electronic goods would
likely result in a rally for several top electronic retailers... We highlighted two traditional companies - Best Buy (BBY) 43 -4 5/8
and Circuit City (CC) 36 1/8 -15/16 and one online firm - Egghead/Onsale (EGGS) 15 1/4 +1/4... We followed this piece up
with a bullish Story Stock on regional player - Ultimate Electronics (ULTE) 23 3/4 +3/4... Only the latter stock has held on to its
gains... BBY and CC rallied initially only to fall back sharply on disappointment over November same-store sales numbers...
EGGS never got on track, falling as soon as its merger was complete... While we are disappointed in the performance of
these stocks, we don't think now is a good time to abandon ship - at least in most cases... Same-store sales need to be kept
in context of last year's strength... Take BBY for example... Same-store sales for the latest period rose 9%, which was on top a
12% jump for the same period last year... Should also note that sales for the period were at record levels... Yes there were
some on the street hoping for double-digit growth, but the retreat is clearly an exaggerated reaction to what was generally
good news... CC's numbers were less impressive, with same-store sales up only 2%... But again, the year-ago numbers were
very strong... Weather also played a role in the "soft" numbers, as the warmer than expected climate across the country
resulted in people doing more things outside than in (such as shopping)... But with the holiday fast approaching, shoppers
now very active (malls are jammed) and Breifing.com remains convinced that electronic goods such as DVD players, digital
camcorders, cell phones, digital cameras, PCs, PDAs, games (Sega Dreamcast, Nintendo 64) will be among the biggest
sellers... The one loser in this equation is probably EGGS... As we noted in our Stock Brief we didn't like the company's
fundamentals much... Stock was more a play on improved technicals and seasonal factors... But technicals quickly broke
down... Though stock should get a modest pop in response to respectable Q4 numbers, fundamentals not there to support
longer-term recovery... On the other hand, Briefing.com expects strong Q4 and Q1 numbers to result in full recoveries for BBY
and CC, while ULTE continues to ride impressive top- and bottom-line growth to new highs. -- RW
(Voluntary Disclosure: Position- Long; ST Rating- Strong Buy; LT Rating- Strong Buy) |
