Piper Jaffray Gives December Sales Preview; Reiterates Overweight Rating

Piper Jaffray is reiterating its OW and $46 PT ahead of Best Buy's BBY Dec sales release based on valuation, capital allocation strategy, gross margin expansion potential and the expectation for improving CE trends in 2011. Although no specific consensus sales estimate is available for BBY's December sales, Piper believes that CE spending improved in December from November, but was still down from 2009 levels. Piper is maintaining its -5.8% Q4 F11 comp for BBY vs. consensus of -5.9%. BBY will report the month of Dec sales on 1/7/11 during CES in Las Vegas. Dec is the first and most significant month of Q4, last year representing ~53% of total Q4 US sales. Recall that the Dec US comp was +9.3% meaning that Jan and Feb would have been ~5% and that comps get easier for the rest of Q4. Piper Jaffray believes that mobile phones, eReaders and tablet computers continued to lead the way with strong performance during December. BBY's compelling assortment and free phone offers through the month continued to help drive strong comps in mobile. Piper also believes that Apple's iPad and other tablet PCs performed well leading up to Christmas, while eReaders continued to be a highly demanded item on consumers' shopping lists. Piper Jaffray has a $46 PT on BBY