Market Perception of Best Buy Stock

We have noted Best Buy's positive performance during today's afternoon trading session, during which it logged a 13.0% outperformance of the S&P 500. At its current price of $81.38, the company is now trading in range of its average target price of $83.93, which calls into question its ability to keep moving higher. Analysts have given the Discount Store stock target prices ranging from $67.0 to $96.0 dollars per share, with an average rating of hold.

To understand the market's outlook on the stock, we can look at Best Buy's short interest: the proportion of the fshare float that is tied to short positions. Behind each short position is an investor who believes that the stock will decline in the future. Here, the stock's short interest is 9.3% which means the outlook is split.

Short selling involves borrowing shares and then selling them at current market prices. In the successful version of the strategy, the shares are purchased at a lower price at some time in the future. The investor then returns the shares to the lender, and keeps the profit made on the sell/buy transaction.

One way to get an idea of the market sentiment on a stock is to check its rate of institutional ownership. In the case of Best Buy, institutional investors own 85.0% of the shares. This would indicate a positive sentiment towards the stock among institutions. What does this really tell us?

Institutional investors such as hedge funds, investment firms, and wealth managers devote significant resources to identifying good investments. If they have decided to invest in BBY, it probably means they believe it is a solid investment choice. But it could also mean they are buying up shares in an effort to acquire the company or get seats on the board of directors. Also bear in mind that institutions are fallible (just maybe not quite as fallible as the average retail investor), so they may simply be wrong when they think they've found a good stock.

Overall, there is mixed market sentiment on Best Buy because its an analyst consensus of some upside potential, a hold rating, an above average percentage of its shares sold short, and a significant number of institutional investors. Warren Buffett famously said that in the short term, markets are voting mechanisms, but in the long term, they are weighing mechanisms. This means that long term investors should be aware of a stock's fundamentals before committing.

Buffett was one of the fist investors to focus on free cash flow as a yardstick for a company's health. Here are BBY's recent cash flows:

Date Reported Cash Flow from Operations ($ k) Capital expenditures ($ k) Free Cash Flow ($ k) YoY Growth (%)
2023 1,470,000 795,000 675,000 -24.5
2022 1,824,000 930,000 894,000 -64.45
2021 3,252,000 737,000 2,515,000 -40.32
2020 4,927,000 713,000 4,214,000 131.28
2019 2,565,000 743,000 1,822,000 14.66
2018 2,408,000 819,000 1,589,000
The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.