Best Buy Stock (BBY): Approaching Key Technical Support Level - Analysis

Over the past few months, a support level has formed in the chart Best Buy Co. (BBY - Get Rating).  If the stock’s price falls under this level, a breakdown is expected.

BBY is one of the largest consumer electronics retailers in the U.S. Its stores provide computing and mobile phones, home theater products, gaming hardware and software as well as appliances such as dishwashers, ovens, refrigerators, and blenders.

The company is focused on accelerating online sales growth, improving its multichannel customer experience, and developing new in-store and in-home service offerings. BBY saw increased demand for its products and services in the final quarter of 2020 as digital sales surged.

BBY had $5.7 billion in cash on hand as of the most recent reported quarter. This compares to only $670 million in short-term debt and $3.4 billion in long-term debt. The company also has a high return on equity of 42.3%.

In terms of growth, BBY has seen steady earnings and revenue growth over the past few years. Analysts expect sales to rise 23.9% year over year during the current quarter. Earnings are forecasted to surge 89.6% during the same period.

The stock is currently undervalued with a trailing P/E of 15.37 due to its recent bearish momentum.

Take a look at the 1-year chart of BBY below with added notations:

  Chart of BBY provided by TradingView

BBY formed an important level of support at the $100 (green) mark over the past few months. The stock is currently sitting right on that $100 level again. If the support were to break, lower prices will likely follow for BBY.  Therefore, if the stock were to break below the support level, a short position could be entered with the expectation of a breakdown.