Amazon, Best Buy Find 'Mutually Beneficial Opportunities' In TV Partnership

Best Buy Co Inc BBY announced Wednesday that it will sell Amazon.com, Inc. AMZN Fire TV Edition Smart TVs integrated with Alexa voice commands.

Morgan Stanley views the partnership as profitable for the competitors — especially Best Buy.

The Rating

Morgan Stanley analyst Brian Nowak maintained an Overweight rating on Amazon with a $1,500 price target.

The Thesis

Unique offerings like Smart Fire TVs could prove catalytic for Best Buy’s “cycle-driven business,” and the installation of Alexa in its house Insignia brand could drive segment sales, Nowak said in a note. (See the analyst's track record here.) 

The deal testifies to Best Buy’s deepening relationship with Amazon — an alignment that could mean survival in a challenging retail environment. The competitors previously cooperated on Amazon device distribution and Alexa-activated stock-keeping units, Nowak said. 

“In our view, this collaboration is an acknowledgement of BBY’s importance in the category and how the two competitors are finding mutually beneficial opportunities." 

At its base, the deal is indicative of Best Buy’s progress as a multichannel site for consumer electronics, the analyst said. 

“At one point AMZN represented BBY’s single biggest threat, but this risk has seemingly been neutralized as BBY improved all aspects of its offering,” Nowak said. “From its pricing structure, product assortment, store experience, customer service and website functionality, BBY arguably has the best value proposition in the segment.”

Price Action

Best Buy shares popped as much as 3.9 percent on Wednesday’s news but faded Thursday to trade down 2.68 percent off the opening price at the time of publication. 

Amazon, meanwhile, continued a two-day run and was up 1.5 percent. 

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Photo courtesy of Amazon.