Very few people can project where they will be in five years, so why do we think businesses can do it as well. There are so many variables that arise, wane, and simply change over half-a-decade. Don't get me wrong, it's cute when businesses do it, but it's more about the PR and being able to say "we have a plan, we know where we are headed" than actual expectations of reality.
Best Buy (BBY) management is targeting $50 billion in enterprise revenue in 2025 compared to their current guidance of $43.5 billion in fiscal year 2020. That's not exactly lighting the world on fire in terms of revenue growth. Through $1 billion in cost reductions and efficiencies, the company believes it can increase non-GAAP operating income to 5% compared to the current 4.6% rate which would be a small boost to the bottom line.
The biggest excitement stems from the potential of Best Buy Health. The company seeks to take advantage of an aging population by jumping into the healthcare space. The thing is the company has already entered the space with its $800 million purchase of Great Call, a company designed to provide health and emergency services to seniors via emergency-response systems. Best Buy wants to add health monitoring systems for seniors as well as the sale of fitness machines and health equipment to the mix.
You're going to hear HUGE healthcare numbers in terms of potential revenue, but remember this is only a small slice of the pie. The medical device offerings from Best Buy are likely to skew to the basic side of the medical device market. I would imagine competition from Amazon (AMZN) , Walmart (WMT) , and Target (TGT) would quickly come online should the equipment/technology side gain traction. Could we see Peleton beside NordicTrack and ProForm in the stores? Sure. Will it help the top line? I believe it will. However, until we see proof this will positively impact the bottom line, I'm not a buyer based on the potential here. It's going to be highly competitive and margins will thin out quickly.
In terms of trading the stock, a pullback to weekly support has been the best entry. That would put traders in the position to look long around $63 with a stop in the $59 to $60 range. A weekly close over $68.50 would also be intriguing on the long side as it would place shares above short-term resistance and into the middle of the 2019 range with an upside potential of $75 to $77. The stock has struggled under the 20-week simple moving average (SMA), so there is no reason to be long under it unless we test and hold the previously mentioned support. Above the 20-week SMA provides for a nice hedge/stop point using that moving average.
This one falls into the I don't love it, but I don't hate it category, but that's a view that keeps me on the sidelines for now.
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