* Best Buy shares touch new 52-week low this week
* Bulls say shares have reached bottom
* Bears fret over overhead costs, market share, TV sales
* Best Buy's larger stores potential "white elephants"
* Strong cash flow and valuation-investors
NEW YORK, April 6 (Reuters) - Investing in top U.S. consumer electronics chain Best Buy (BBY.N) is not for the faint of heart.
Best Buy's shares have lost about a third of their value since November and touched a new 52-week low of $28.10 earlier this week. The stock has been in free fall since March 24, when Best Buy forecast a weaker-than-expected fiscal-year profit on sluggish demand for televisions.
The retailer also reported its third straight quarter of same-store sales declines as it lost bargain-hungry shoppers to online retailer Amazon.com Inc (AMZN.O) and mass merchants Target Corp (TGT.N) and Wal-Mart Stores Inc (WMT.N).
Best Buy has admitted that consumers are showing little interest in newer technologies. Analysts also worry about its oversized stores and high overhead costs.
Still, the company has steady cash flow and its shares trade at 8.23 times forward earnings, smaller than the consumer electronics sector average of 10.41.
A GOOD TIME TO BUY?
Many investors say the retailer's stock has hit a bottom.
"The pessimism about the company is overdone," said Arnbjorn Ingimundarson, founder of Boston-based private investment firm Vitki LLC. "While it can be dangerous to try to pick a bottom, based on the last couple of days, it seems like the shares may have found a floor, for now."
Some investors agreed.
"The stock is extraordinarily cheap and confidence in the management strategy is at an extraordinary low," said Larry Haverty, associate portfolio manager of Gabelli Global Multimedia Trust, which owns 38,500 shares of Best Buy. "My hope is that it's very close to a bottom. You very rarely see retail stocks sell at this cheap a price."
There also have been no warning signs about the company's profitability.
"There is nothing really in recent numbers to show that the profitability of the company is about to collapse. So basically I just see it as a very enticing valuation," Ingimundarson said.
But some investors, like Harry Rady, senior portfolio manager of San Diego-based Rady Asset Management, are waiting for the retailer's shares to fall further before investing.
"At 25 bucks, Best Buy is a best buy," Rady said.
Other investors have stayed away because of the questions surrounding Best Buy's long-term prospects.
"While Best Buy is looking more and more attractive every day, we would still have questions of the long-term fundamentals of that business, the size of the store, and how to continue to manage the deflation we're seeing across their products" said Matthew Lockridge, a buyside analyst at Westwood Holdings Group, which does not own Best Buy shares.
Industry experts urged Best Buy to shrink larger, older stores as many shoppers increasingly buy gadgets online.
"These (large format) stores were built for another era in consumer electronics retailing." said Craig Johnson, president of Customer Growth Partners."These stores, unless they are radically reconfigured or shrunk, are white elephants."
"They either have to work out deals with the landlords to get out of these 10 to 20-year leases and shrink the square footage or they need to take that space and repurpose part of it," Johnson said, suggesting options such as lending some space to a complementary retailer or subleasing space to carriers such as Verizon (VZ.N) and AT&T (T.N).
Best Buy made one step in this direction in February by announcing plans to open more small format stores.
There has also been evidence of Best Buy losing market share in the past two quarters. But predicting the store's future might be harder, said Wedbush Securities analyst Michael Pachter.
"We don't really know for sure whether they will continue to lose share. It is probably prudent for most investors to just avoid having to make that call and find something else to invest in," Pachter said.
(Reporting by Dhanya Skariachan and Liana B. Baker; Editing by Bernard Orr)