FORTUNE — Credit Suisse (CS) is advising Best Buy (BBY) founder Dick Schulze on his proposed take-private acquisition of the electronics retailer. It also is one of the few banks whose senior retail research analyst doesn’t think Best Buy is on its way to the liquidation scrap heap.
On July 31, Gary Balter published a research note titled Disagreeing with Consensus. He begins:
“The current consensus on Best Buy is that cash flow is on its way to zero, joining such illustrious retailers as Circuit City, CompUSA, Good Guys and many other consumer electronic chains. We disagree with that for a number of reasons and while we are not changing our rating, we like the idea that this ‘mismanaged’ chain trades at just over 2x cash flow, has over a 20% free cash flow yield and is universally hated by all the smart money.
Kind of interesting that Balter puts “mismanagement” in quotes, given that he then goes on to bash company executives for failing to develop a strong online presence, ignoring customer experience, being overpriced, failing to incentivize most salespeople with commissions and maintaining overly-large store sizes. I guess we’re supposed to pay more attention to the latter point:
Best Buy’s revenue is still pretty good, despite being run by nincompoops. Imagine what could happen if competent people were in charge.
To that end, Balter approves of interim CEO Stephen Gillett and also thinks the company is well positioned to benefit from changing Internet sales tax rules. He makes mention of rumors that Schulze was mounting a buyout offer — remember, this was from last week — but only in the context of uncertainty (thus causing him to maintain Best Buy’s “neutral” rating).
Yes, I know that there is supposed to be a firewall between banking and research. And I’m not arguing a violation here. Just an interesting juxtaposition.
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