Best Buy May be a “Blood in the Street” Opportunity


Best Buy (BBY) had an incredible year.

Since bottoming out at $48.43 in March, the stock ran to a high of $120.50.  Shortly after failing at triple top, it fell to $102.04.  Making things worse, Goldman Sachs just downgraded the stock to a sell rating from neutral.  And, as noted by CNBC, the firm noted the strength of the company may not be enough to push shares higher in the year ahead.

As quoted by Seeking Alpha, Goldman Sachs said, “Best Buy is one of the best run retailers in the U.S. and continues to evolve its omnichannel, but as we look to 2021 we see risk for the stock based on: 1) very strong compares; not only from strong sales in 2020 but the ability to capture ~80% of sales when the stores were closed, making it a harder compare, 2) its lack of gross margin flow through in 2020, 3) valuation.”

Contrarians see opportunity here.

For one, it appears a good deal of negativity has been priced into the stock with the near-$20 pullback in recent weeks.  Two, the stock is becoming oversold at its lower Bollinger Band.  It’s also excessively oversold on RSI, MACD, and Williams’ %R.

Betting against Goldman’s downgrade, we believe the stock could race higher, near-term.


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