If you need a full analysis/detailed write-up, please email on kedar@kedarcap.com . I will NOT respond to anonymous emails.
Shorting at $65.00 (43.9% upside) over 1 to 2 year investment horizon.
BBY offers an attractive risk-return profile for an investor willing to wait
before taking a short position. In spite of fundamental challenges to its
business, an extra week of holiday sales, coupled with major share buybacks and
short term margin improvement, are likely to push shares into making another
year end high. Despite the recent sell off, BBY trades at a historical high
multiple of 6x EBITDA and a forward P/E of close to 13x. This echo’s of a
company whose investors expect it to continue to beat expectations – a
sentiment I do not share. On the contrary, not so palatable results might be in
the cards, as the tailwinds from ‘Renew Blue’ disappear, while BBY is
simultaneously expected to make major reinvestments to find new growth
opportunities, replace older revenue and capture more dollars per customer. The
likely results? Top line growth, profit margins and cash flow will come under
pressure resulting in a definite price correction.
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