Best Buy Stock Not Expected To Move Much Following Q1 Earnings

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Best Buy

Best Buy (NYSE: BBY), a specialty retailer of consumer electronics, is scheduled to report its fiscal first-quarter results on Tuesday, May 24. We expect the retailer’s stock to likely see little to no movement post fiscal Q1 with revenues beating estimates slightly but earnings coming in line. The company’s sales are expected to decline in fiscal 2023 (year ending Jan 2023) as contrasted with a boom in fiscal 2022, with the hardest hit coming in Q1. The consumer spending skyrocketed with the help of federal stimulus payments and a growing economy in Q1 a year ago, and as these factors were not present at the beginning of this year – the company’s short-term outlook will likely be under pressure. To add to this, Best Buy probably also had difficulty keeping up with demand for appliances, PCs, and video game equipment in the quarter largely due to the global supply chain shortages. Also, the current 40-year high inflation is also another major headwind for the  consumer electronics retailing niche. However, these challenges are expected to pressure Q1 sales but should not threaten the wider fiscal year, according to the company’s management.

Our forecast indicates that Best Buy’s valuation is $73 a share, which is marginally higher than the current market price. Look at our interactive dashboard analysis on Best Buy’s Earnings Preview: What To Expect in Q1? for more details.

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(1) Revenues expected to be marginally ahead of consensus estimates

Trefis estimates Best Buy’s Q1 2023 revenues to be around $10.5 Bil, slightly higher than the consensus estimate. The company saw a tough selling environment in Q4, due to the omicron variant and supply chain problems. The company’s sales fell 3% year-over-year (y-o-y) to $16.4 billion with its comparable store sales down 2% for the quarter. Still, comps were up 10% for the second consecutive time for the full year 2022. The retailer also achieved roughly the same impressive 6% operating margin in FY’22 as it did in FY’21.

We forecast Best Buy’s Revenues to be $50.2 billion for full-year fiscal 2023, down 3% y-o-y. Throughout this year, and maybe in the next fiscal year, Best Buy expects the market to slow before sales again begin setting all-time records in fiscal 2025.

2) EPS likely to come in line with consensus estimates

Best Buy’s Q1 2023 earnings per share (EPS) is expected to be $1.63 per Trefis analysis, almost in line with the consensus estimate. Best Buy’s gross margin declined by almost a full percentage point in Q4 as the company eased some of its services pricing, while its adjusted operating margin decreased to 4.9% from 6.1%. As a result, Best Buy’s earnings per share fell 16% to $2.65 compared to $3.15 in the prior-year period. In light of the modest revenue growth outlook and the prospect for rising spending, BBY might be faced with weaker earnings growth in FY’23 as well.

(3) Stock price estimate in line with the current market price

Going by our Best Buy’s Valuation, with an EPS estimate of around $8.97 and a P/E multiple of 8.1x in fiscal 2023, this translates into a price of around $73, which is in line higher than the current market price.

It is helpful to see how its peers stack up. BBY Peers shows how Best Buy compares against its peers on metrics that matter. You will find other useful comparisons for companies across industries at Peer Comparisons.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

 Returns May 2022
MTD [1]
YTD [1]
Total [2]
 BBY Return -20% -29% 70%
 S&P 500 Return -6% -18% 74%
 Trefis Multi-Strategy Portfolio -5% -21% 209%

[1] Month-to-date and year-to-date as of 5/23/2022
[2] Cumulative total returns since the end of 2016

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