For investors who own Best Buy stock, it's like 2008 all over again. Only without the Great Recession.
Best Buy Co. Inc. shares Friday fell another 3.3 percent, or 66 cents, to close at $19.28, a level not seen since 2008 when the nation's economy began its worst slide in more than 80 years.
This time, however, problems beyond the broader economy are dragging down Best Buy stock, analysts say. The board of directors is investigating allegations that former CEO Brian Dunn, who suddenly resigned last month, used company-leased aircraft to carry on an inappropriate relationship with a female employee. The Star Tribune also learned that investigators are examining whether top leaders improperly withheld information about Dunn's behavior from the board.
The turmoil within the company prompted one prominent Wall Street analyst Friday to cut his rating on Best Buy stock. In a report titled, "Too Many Distractions at a Time of Significant Pressure," Credit Suisse analyst Gary Balter lowered his rating for Best Buy to "neutral" (or hold) from "outperform" (or buy).
"When we first heard that Mr. Dunn was leaving ... we took it as a positive signal that the board realized that a new direction was needed," Balter wrote. "However, as more details of the reason for Mr. Dunn's departure have come out ... we wonder who is steering the ship in this increasingly turbulent time."
A company spokesman declined to comment.
Best Buy faces challenges beyond corporate leadership, analysts say, noting a slow economic recovery and a weakening consumer electronics market. Best Buy has been struggling to grow sales as it faces increasing competition from Wal-Mart and online retailers like Amazon.
However, investors are increasingly anxious to learn the outcome of investigation, an uncertainty that has depressed Best Buy shares, industry observers say.
Last month, the company promised to release the results in a matter of weeks and "to take appropriate action if warranted."
"The stock is going to drift until they disclose what Dunn did," said Joe Barsky, retired head of equity mutual funds at Ameriprise Financial Inc. "You could conjure up anything. Who knows?"
At the same time, investors could see Best Buy's suppressed stock prices as an opportunity to buy low, given its strong cash flow and roughly $50 billion in annual sales. And Best Buy stock will most likely see a bump once the Windows 8 operating system debuts later this year, said Jeremy Brunelli, an analyst with Consumer Edge Research in Stamford, Conn.
But until then, investors already holding Best Buy stock will have to sweat it out, analysts say.
"Time is not the friend of Best Buy, as the industry continues to evolve away from them," Balter of Credit Suisse wrote. "And while the company is financially strong, a solid balance sheet is not a reason to buy" Best Buy stock.
Thomas Lee • 612-673-4113