Best Buy Co., which is set to report third-quarter earnings next week, is among the 2009 top picks of a KeyBanc Capital Markets analyst partly on the likelihood that it will benefit from Circuit City's Stores Inc.'s chapter 11 bankruptcy filing.
Thomas Bradley of KeyBanc said the Richfield, Minn., company now has a "virtual national monopoly" in the consumer-electronics sector, leaving it well positioned to take advantage of any upswing once economic conditions improve.
Circuit City filed for bankrutpcy protection last month as it faced pressure from vendors and consumers who aren't spending. Its Canadian operations also filed for similar protection. Meanwhile Best Buy, the nation's largest consumer-electronics retailer, managed to squeeze out a same-store sales increase in the second quarter.
Same-store sales, or sales at stores open at least a year, is a key indicator of retailer performance since it measures growth at existing stores rather than newly opened ones.
Bradley also believes Best Buy offers investors an attractive stock price and strong financials.
"Best Best has a solid balance sheet, with $2.7 billion in debt and $600 million in cash, and we forecast strong free cash flow of $475 million in 2008 and $350 million in 2009," the analyst wrote in a note to clients.
Bradley maintained a "Buy" rating.
Shares of Best Buy added 11 cents to $24.21 in Friday afternoon trading.