Best Buy Jumps 8% on Stellar Q2 Results, Lifts Guidance

American consumer electronics retailer Best Buy Co., Inc. (BBY) reported stellar second-quarter results driven by strong demand for technology products and services. Notably, consumers’ need for technology saw a dramatic increase, reflecting permanent lifestyle changes like hybrid work and the streaming of entertainment content.

The company posted adjusted earnings of $2.98 per share, up 74% year-over-year and significantly better than analysts’ estimates of $1.85 per share. (See Best Buy stock charts on TipRanks)

To add to that, revenue climbed 24% compared to the year-ago period to $11.85 billion and outpaced the Street’s estimate of $11.49 billion. Also, Enterprise comparable sales grew 20% year-over-year, primarily due to higher sales of home theaters, appliances, computing, mobile phones, and services.

Corie Barry, CEO of the company, said, “Customers continued to leverage technology to meet their needs, and we are providing solutions that help them work, learn, entertain, cook and connect at home. The demand was also bolstered by the overall strong consumer spending ability, aided by government stimulus, improving wages and high savings levels.”

Based on the continued momentum in the business, Best Buy raised its outlook for the full year 2022. BBY now projects revenue to be in the range of $51 – $52 billion compared to analysts’ estimates of $49.3 billion.

Additionally, for the third quarter, BBY forecasts revenue to fall in the range of $11.4 – $11.6 billion, much higher than the consensus estimate of $10.55 billion.

In response to the results, Wells Fargo analyst Zachary Fadem lifted the price target on the stock to $125 (2.9% upside potential) from $120 while maintaining a Hold rating.

Fadem said, “BBY continues to navigate the pandemic in impressive fashion, with share gains building as it constructs a structurally stronger, higher-margin business post-COVID (via initiatives like health/wellness, membership, Omnichannel, etc.). That said, with Q3 to-date comps flat (+20% on 2-year) and BBY’s outlook implying a sequential improvement in Sep/Oct (2-year stacks) despite tougher compares, it appears a decent level of optimism is being baked in, in our view.”

Having said that, the analyst attributes the company’s heightened valuation and limited margin upside for his moderate view on the stock.

The Wall Street community is cautiously optimistic about the stock with a Moderate Buy consensus rating based on 9 Buys, 6 Holds, and 1 Sell. The average Best Buy price target of $131.33 implies 8.1% upside potential to current levels. Shares have gained 7.9% over the past year.

Furthermore, according to TipRanks’ Smart Score system, Best Buy gets a 7 out of 10, which indicates that the stock is likely to perform in line with market averages.