Best Buy Is A Broken Stock (BBY, WMT, AMZN)

Consumer electronics giant Best Buy BBY appears to be in trouble. The stock is completely broken and investors are understandably worried about the company's financial performance as they have missed quarterly estimates badly a number of times in the last year.

Now Best Buy (BBY) is considering lowering prices in order to compete with the likes of Amazon AMZN and Wal-Mart WMT. It is unclear, however, if this development will help the company, as lower prices will squeeze margins. It is a very tricky proposition because the company will have to increase sales volume substantially to offset margin contractions.

Best Buy's primary competitors Circuit City and Ultimate Electronics have both gone bankrupt. This can be viewed in one of two ways it seems. On the surface, this is good news for Best Buy, as it gives them a near monopoly on the space.

An argument can be made, however, that the consumer electronics business, in the form of big box retail stores, is a business in severe decline, which is evidenced by Best Buy's poor recent performance as well as the bankruptcies of its competitors.

In either case, shareholders of BBY have to be disappointed in the stock's performance and concerned about the future. Over the last year, which has been excellent for the equity markets, BBY shares have lost 11.55%. In the last 6 months, BBY is down nearly 25%. This performance leaves a lot to be desired, and shareholders have more of the same to look forward to if management cannot turn the ship around at Best Buy.