Best Buy Reports Solid Quarter Going Into Holiday Season

Best Buy Co., Inc. (Ticker Symbol: BBY) released strong earnings and revenues for the quarter before the opening bell on Tuesday. The American multinational consumer electronics retailer reported an earnings per share beat of $1.13 per share vs. Wall Street analysts’ expectations of $1.03 cents per share. Additionally, Best Buy reported a revenue beat of $9.76 billion for the period, which was higher than Wall Street analysts’ expectations of $9.70 billion.  The company also reported strong same-store sales growth of 1.7% vs. Wall Street analysts’ expectations of 1.3%.

The Richfield, Minn.-based company also gave an update on its earnings guidance for its shareholders.  Best Buy is now forecasting its fiscal 2020 earnings to be in a range between $5.81 to $5.91, which is up from its prior range of $5.60 to $5.75 per share. The new forecast also beat Wall Street analysts’ expectations of $5.74 per share.

Just in time for the holiday season, Best Buy is introducing next-day delivery on many of their items and is allowing customers that place orders online to pick up their order in-store within an hour. There is no minimum purchase required and there is no membership that customers have to sign up for. Additionally, earlier this year in the first quarter, Best Buy announced a $3 billion dollar stock repurchase program.

The above image is of Best Buy’s stock over roughly the past two years. The stock had a relatively uneventful start to 2018 and traded in a range between the price levels of $66.00 and $84.00.  Best Buy did have a bright moment in 2018 where the stock traded to an all-time high of $84.37 on August 22nd, 2018. In the fourth quarter of 2018, the stock broke down from its trading range and proceeded to sell off over 70% from its all-time high price. Best Buy then put its first oversold condition in its Relative Strength Index in over two years.  The stock had a positive start to 2019, led by a strong first-quarter earnings report that sent the stock gapping higher. Best Buy spent the next six months trading in a range between the price levels of $62.00 and $78.00 before finally breaking from that range on this quarter’s earnings release.

Traders who are bullish on Best Buy should watch for the strength in the stock to potentially continue for a potential move back to test the all-time highs around $84.37.

Traders who are bearish on Best Buy should watch for a potential move back below its earnings day low of $77.04, for a potential move back down to test the 50-day simple moving average and its November lows around $72.00.

(Chart above courtesy of www.tipranks.com)

Based on a survey of 12 analysts offering 12-month price targets, the average price target for Best Buy’s stock is $80.09. According to that number, the stock is priced at a premium relative to Wall Street’s analysts and could be considered overvalued around current levels near $83.45.

Investors in the retail electronics space should look to competitor Costco’s (Ticker Symbol: CSCOWealth Strength IndexAAPL is Extremely Up and trending Up) earnings release on February 12th for fresh news within the sector.

 


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