By Tonya Garcia, MarketWatch
Best Buy Co. Inc.’s succession plan is making investors a little nervous, with shares closing down 0.5% on Monday, but some analysts are upbeat about the transition.
Best Buy /zigman2/quotes/205918291/composite BBY +3.27% announced that Chief Executive Hubert Joly will be stepping down from his post, assuming a newly created position, executive chairman, effective June 11, following the shareholder meeting. Corie Barry, currently the company’s chief financial officer, has been promoted to the CEO spot.
In addition to his leadership of the board, Joly will play a supporting role to Corie on issues like strategy and take some responsibility in areas including government affairs and leadership development.
Joly joined Best Buy in 2012. Since December of that year, Best Buy shares have rallied six-fold while the S&P 500 index /zigman2/quotes/210599714/realtime SPX +2.62% has doubled and the SPDR S&P Retail ETF /zigman2/quotes/206947004/composite XRT +2.38% has gained 45%.
Barry joined the company in 1999.
“While Best Buy’s shares are likely to express some disappointment today as its current CEO, Hubert Joly, is very well regarded, we think the choice of Corie Barry is a good one,” said UBS. “Ms. Barry is likely to build on the foundation that has been established over the last several years. Thus, Best Buy is still in a good spot to maintain its strong position in our view.”
Best Buy stock has gained 38.3% for the year to date, outpacing the S&P 500 index, which is up 16%.
The issue for Best Buy isn’t leadership, but rather the forces that impact consumers and merchandise, analysts say.
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“We believe the intermediate-term trajectory for Best Buy’s shares will be heavily influenced by the company’s ability to sustain its comp momentum in the face of a fading consumer spending stimulus from tax reform,” UBS said.
UBS rates Best Buy shares neutral with a $72 price target.
“Our negative investment view reflects margin pressures we see through fiscal year 2021 as U.S. computing and mobile phone demand (half of Best Buy’s sales) approaches over-saturation, Apple expands distribution and Amazon competition intensifies,” wrote CFRA’s Camilla Yanushevsky.
CFRA has a 12-month price target of $60 on Best Buy stock.
On the issue of CEO transition, Raymond James is bullish on the Barry news.
“We have total confidence in Corie Barry as CEO,” analysts said, praising her “strong financial and cost discipline over the years.”
Raymond James rates Best Buy stock strong buy.