Shares of Best Buy (BBY) have been declining steadily since December 2010. A major issue for the electronics retailer is that buyers of TVs and other consumer electronics products come to the Best Buy’s stores to browse and then buy the products they like at lower prices from online retailers.
Best Buy stock is down 31.5% over the past 12 months with a five-year average return of -14.9%.
As a result of this terrible performance, the retailer has been trying to stop the bleeding by floating two ideas.
The first is to reduce the number of big-box stores and build new boutique stores similar to the Apple (AAPL) retail locations.
Analysts appear to dismiss this plan, because unlike Apple, Best Buy does not have its own proprietary products.
In addition, consumers of Apple products tend to line up and sleep out in front of Apple stores so that they can the first on their block to own the latest product release.
Back on May 21, Best Buy’s stock slumped to a multiyear low of $17.53. Then in late June there were reports that its founder Richard Schulze was considering putting together a plan to take the company private.
From a June 29 close at $20.96 the stock popped to $23.57 on July 2 as this prospect briefly was the topic of discussion.
My Web site ValuEngine rates Best Buy ($21.14) a BUY, with fair value at $37.45, which makes the stock 43.5% undervalued.
The ValuEngine one-year price target is $23.50. The daily chart for Best Buy shows declining momentum with the stock ending Tuesday above its 21-day and 50-day simple movingaverages at $20.32 and $19.91, respectively.
It’s also below its 200-day simple moving average at $23.70. My weekly value level is $20.46, my quarterly pivot is at $21.14 and my annual risky level is at $26.29.
This morning, Best Buy shares gapped lower at the open and hit $19.93. This was in sympathy with HHGregg (HGG), which plunged more than 20% at the open after announcing lower guidance.
Investors in Best Buy who had a good-’til-cancelled limit order to buy weakness at my $20.46 weekly value level would have been filled at the $19.93 opening price.