Best Buy reported its earnings this morning for its Q1. Revenues were up year over year for the quarter (qtr/qtr) by a scorching $85 million, or 1%. But this came at the expense of price competition, as its gross profit declined 5.7%. Operating income plunged 19.4%. Net income dropped 18%. Earnings per share declined 15% (share buybacks translated into a lower decline in e.p.s. than net income). Cash provided by operating activities (from the Company’s “statement of cash flows,” not from the Jeff Bezos “free cash flow” comic book) took a 51% cliff dive, dropping $249 million qtr/qtr.
But because Best Buy “beat the Street” estimates, the stock jumped $8 this morning, adding over $2.4 billion in to BBY’s market cap. To say this is absurd does an injustice to the word absurd.
When a stock gains $2.4 billion on declining economics and profitability because it “beats the Street,” you know it’s end of days for the stock bubble. This is quite similar to the late 1999 – early 2000 timeframe, when a Maria Bartiromo would breath the name of a tech stock and it would jump $10 almost instantaneously.
Those who cannot remember the past are condemned to repeat it. – George Santayana