Flat Since The Beginning of 2023, What’s Next For Best Buy’s Stock Post Q4 Results?

BBY: Best Buy logo
Best Buy

Note: Best Buy’s FY’24 ended Jan 2024

Best Buy (NYSE: BBY), a specialty retailer of consumer electronics, is scheduled to report its fiscal fourth-quarter results on Thursday, February 29. We expect the retailer’s stock to decrease post-fiscal Q4 with revenues and earnings missing estimates slightly. Several big factors hurt the consumer electronics retailing niche, including rampant inflation and supply chain disruptions in FY’24 (which includes 53 weeks). A tough comparison with the pandemic and stimulus-induced growth over the past two years and inflationary headwinds contributed to the slowdown. Best Buy expects the market to slow before sales again begin setting records in fiscal 2025.

For the fourth quarter, Best Buy expects comparable sales to decline in the range of 3.0% to 7.0%. On the profitability side, the retailer expects Q4 FY’24 non-GAAP operating income rate to be in the range of 4.7% to 5.0%, which compares to a rate of 4.8% last year. For the full year FY’24, the company expects revenue of $43.1 billion to $43.7 billion and EPS is expected to land in a range of $6.00 to $6.30. In addition, its comparable sales are expected to decline 6.0% to 7.5% for the full year FY 2024.

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BBY stock has seen a decline of 20% from levels of $100 in early January 2021 to around $80 now, vs. an increase of about 35% for the S&P 500 over this roughly 3-year period. Notably, BBY stock has underperformed the broader market in each of the last 3 years. Returns for the stock were 2% in 2021, -21% in 2022, and -2% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 – indicating that BBY underperformed the S&P in 2021, 2022, and 2023. In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the Consumer Discretionary sector including AMZN, TSLA, and TM, and even for the megacap stars GOOG, MSFT, and AAPL. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could BBY face a similar situation as it did in 2021, 2022, and 2023 and underperform the S&P over the next 12 months – or will it see a recovery?

Our forecast indicates that Best Buy’s valuation is $73 a share, which is 8% lower than the current market price. Look at our interactive dashboard analysis on Best Buy’s Earnings Preview: What To Expect in Q4? for more details.

(1) Revenues expected to miss consensus estimates marginally

Trefis estimates Best Buy’s Q4 2024 revenues to be around $14.5 billion, slightly below the consensus estimate. In Q3, the electronics retailer posted $9.76 billion in revenue, down 8% y-o-y. The retailer saw its domestic comparable sales fall 7.3% during the quarter. The comp decline followed a 6.3% decline in the previous Q3 of 2024. The largest drivers of the comparable sales decline on a weighted basis were computing, appliances, home theater, and mobile phones. Those drivers were partially offset by growth in the gaming category. International comparable sales dropped 1.9% during the quarter. We forecast Best Buy’s Revenues to be $44.3 billion for the full-year fiscal 2024, down 4% y-o-y.

2) EPS likely to come in slightly below consensus estimates

Best Buy’s Q4 2024 earnings per share (EPS) is expected to be $2.49 per Trefis analysis, marginally missing the consensus estimate. In Q3, the electronics retailer posted $1.29 compared to $1.38 a year ago in adjusted EPS. Its domestic gross margin improved by 100 basis points y-o-y to 22.9%, driven by improved financial performance from the company’s membership offerings, which included higher service margin rates. Favorable product margin rates and lower supply chain costs were also margin drivers. The international business gross margin was down 130 basis points to 22.1% due to unfavorable product margin rates. Also, the retailer’s adjusted operating margin declined to 3.8% from 3.9% a year ago.

(3) Stock price estimate lower than the current market price

Going by our Best Buy’s Valuation, with an EPS estimate of around $6.16 and a P/E multiple of 11.9x in fiscal 2024, this translates into a price of around $73, which is 8% lower 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.

Returns Feb 2024
MTD [1]
Since start
of 2023 [1]
Total [2]
 BBY Return 9% -1% 85%
 S&P 500 Return 5% 32% 127%
 Trefis Reinforced Value Portfolio 4% 43% 633%

[1] Returns as of 2/28/2024
[2] Cumulative total returns since the end of 2016

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