What analysts are saying about Best Buy, SPS Commerce

Updated: August 11, 2012 - 8:54 PM

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BEST BUY BID TOO LOW?

Last week Best Buy Co. Inc. founder Richard Schulze floated a proposal that he was prepared to buy the company and take it private. In his letter to the board, Schulze indicated he was willing to pay $24 to $26 per share for the consumer electronics retailer. That offer was a hefty premium over the closing price of Best Buy stock on Friday, Aug. 3, which was $17.64.

But some analysts believe that Schulze will have to raise his offer significantly if he wants to win back the company he helped build into the largest consumer electronics retailer in the country. "We think Best Buy turns its nose up at $24 to $26 per share," wrote Daniel Binder, an analyst with Jefferies & Co. "We think an ultimate takeout bid would have to be in the high $20s to low $30s."

Said Oppenheimer analyst Brian Nagel: "The Best Buy board is likely to balk at a seemingly 'low offer' for the company."

SPS deal is a winner

Last week, SPS Commerce acquired Edifice, a provider of cloud-based, point-of-sale analytics software with more than 500 clients. SPS' $37.7 million acquisition of New Jersey-based Edifice boosts SPS' cloud-based supply-chain software offerings.

Though Edifice is a smaller company than SPS, its average annual subscription was $20,000 per client, well above the $3,638 average for SPS. In favor of the deal was Barrington Research analyst Jeffrey Houston. He maintained his "outperform" rating on SPS Commerce in a note to investors after the merger announcement.

"We like that 90 percent of leads come from retailers, the company's steady 20 percent-plus revenue growth, improving profitability, and a [software-as-a-solution] model," Houston wrote.

PATRICK KENNEDY

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