Brick-and-mortar retail Best Buy Co Inc ( BBY) has been mostly immune to headwinds, and analysts say the company is well-positioned in some of the few growth businesses remaining in the retail sector.
According to Bank of America analyst Curtis Nagle, consumer electronics is the place to be for modern retailers. He says the fledgling smart home devices market could be a significant long-term revenue driver for BBY.
In addition, a major demographic shift is taking place among the consumer population, with the 35- to 44-year-old U.S. consumer group now growing in size for the first time in more than 15 years. Nagle says that growth is great news for consumer electronics retailers like Best Buy.
[See: The 10 Most Valuable Tech Companies in the World.]
“This segment spends between 24 to 37 percent more than younger and older age groups and over the next 10 years is forecast to grow 1.3 percent per year, double the overall pop. growth rate,” he says.
Nagle says rapid brick-and-mortar market share losses to Amazon.com ( AMZN) and other online retailers slowed down considerably in 2017, providing Best Buy, Walmart ( WMT) and other top-performing retail stocks with a chance to shine for the first time in years.
Not only are electronic devices as popular as ever, the increasing complexity of these devices will drive long-term demand for services as well. Nagle says Best Buy’s aggressive investments in improving its online shopping experience and increasing its service offerings have paid off and positioned the company to be one of the rare growth stories in the retail sector today.
Best Buy’s recently-announced $800 million buyout of senior health and emergency services company GreatCall is a perfect example of the type of flexibility that has kept Best Buy relevant in today’s retail industry.
“Increasing focus and investment in service offerings is a big part of BBY’s 2020 strategy and goal of creating recurring and stickier revenues,” Nagle says.
GreatCall already has roughly 900,000 paid elderly subscribers, a demographic group that Nagle says will have increasing technology needs in the years ahead.
Despite multiple long-term growth drivers, Nagle says BBY stock doesn’t seem to get the respect it deserves from a value perspective.
[See: 7 of the Best Stocks to Buy for 2018.]
Bank of America has a “buy” rating and $90 price target for BBY stock.
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Best Buy Co Inc (BBY) Stock Withstands Retail Woes originally appeared on usnews.com
