Where is the best place to buy stocks after the third quarter, down 15% this year?

Note: Best Buy

BBY
FY’23 ends January 28, 2023

Best Buy (NYSE: BBY), a specialty retailer of consumer electronics, is scheduled to report its fiscal third quarter results on Tuesday, November 21. We expect the retailer’s stock to rise after the fiscal Q3 with revenue and earnings slightly exceeding estimates. Several major factors, including rampant inflation and supply chain disruptions, have hurt the consumer electronics retail sector this year. The pandemic and stimulus-driven growth over the past two years, along with a tight comparison to inflation headwinds, contributed to the slowdown. Throughout the year, Best Buy expects the market to slow before sales again set all-time records in fiscal year 2025.

BBY expects full-year revenue to be between $43.8 billion and $44.5 billion. Its enterprise comp growth is expected to decline in the range of 4.5% to 6%. Additionally, the company estimates its operating income rate for the full year will range between 3.9% to 4.1%. Additionally, its non-GAAP diluted EPS is expected to fall in the range of $6.00 to $6.40, compared to a consensus of $6.10. In the fiscal third quarter, BBY expects comparable sales to be slightly better than the negative 6.2% reported by the company for the second quarter and also expects its adjusted operating margin to be around 3.4%.

BBY stock has suffered a sharp 30% decline from the $100 level in early January 2021 to its current level, compared to a roughly 20% rise for the S&P 500 over this nearly 3-year period. Notably, BBY stock has underperformed the broader market each of the last three years. Returns for the stock were 2% in 2021, -21% in 2022, and -15% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 18% in 2023 – indicating that BBY underperforms S&P In 2021, 2022 and 2023. In fact, Consistently beating the S&P 500 Individual stocks have had it tough in recent years – in good times and bad; To giants in the consumer discretionary sector including AMZN, TSLA and TM, and even to megacap stars GOOG, MSFT and AAPL. In contrast, the Trefis High Quality Portfolio is a collection of 30 stocks. Outperformed the S&P 500 every year At the same time. Why so? As a group, HQ Portfolio stocks provided better returns with less risk than the benchmark index; Clearly less of a roller-coaster ride in HQ portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and high interest rates, could BBY face a similar situation as in 2021, 2022 and 2023? S&P’s performance is poor Over the next 12 months – or will it see an improvement?

Our forecast indicates a valuation of Best Buy at $79 per share, which is 6% above the current market price. View our interactive dashboard analysis Best Buy’s Earnings Preview: What to expect in the third quarter? for more information.

(1) Revenue is expected to be slightly ahead of consensus estimates

Trefis estimates Best Buy’s Q3 2024 revenue will be about $9.6 billion, slightly ahead of consensus estimates. In Q2, the electronics retailer reported revenue of $9.58 billion (down 7% year-over-year). The retailer saw domestic comparable sales decline 6.3% during the quarter. The compound decline was better than the 12.7% decline in the year-ago quarter, highlighting the electronics retailer’s sharp decline in sales over the two-year period. The largest drivers of the decline in comparable sales on a weighted basis were computing, appliances, home theater and mobile phones. Those drivers were partially offset by growth in the gaming and services categories. Best Buy was forced to rely more on discounts and other promotions to increase sales, which impacted its profitability. We estimate Best Buy’s revenue for full fiscal 2024 to be $44.4 billion, down 4% year-over-year.

(2) EPS is likely to come in slightly ahead of consensus estimates

Best Buy is expected to have Q3 2024 earnings per share of $1.22, per Trefis analysis, slightly above the consensus estimate. In Q2, the electronics retailer posted $1.22 in adjusted EPS, compared with $1.54 a year earlier. Its gross margin rose 110 basis points to 23.1%, but its operating margin fell to 3.8% from 4.1% in the year-ago quarter.

(3) The stock price estimate is higher than the current market price

going by us Best Buy RatingWith FY2024 EPS estimates of around $6.08 and a P/E multiple of 12.9x, this translates to a price of around $79, which is 16% above the current market price.

It’s helpful to see how its counterparts fare. BBY Peers shows how Best Buy compares to its peers on the metrics that matter. You’ll find other useful comparisons for companies in different industries on Peer Comparisons.

invest with trefis Market Beating Portfolio

see all trefis price estimate