On Friday, BofA Securities maintained their Underperform rating on Best Buy (NYSE:BBY) shares with a consistent price target of $80.00. Ahead of Best Buy's third-quarter fiscal year 2025 earnings report, set to be released on November 26, 2024, BofA Securities provided insights into the company's expected performance.
The forecast includes a third-quarter earnings per share (EPS) of $1.26 and a slight decline in enterprise sales by 1%, which includes a 0.2% negative impact from a calendar shift. This decline is modestly better than the 2.3% decrease reported in the second quarter.
The analysis indicates that Best Buy's computing segment, which includes notebooks and tablets, along with services, may help mitigate some of the weaknesses observed in the appliances and home theater categories. The firm's assessment is based on observed sales data for the third quarter.
Furthermore, BofA Securities has referenced aggregated credit and debit card data from Bank of America (NYSE:BAC) which suggests a slowdown in comparable store sales in October, compared to flat year-over-year results in August. This trend is attributed to consumers who are perceived as being value-conscious, potentially delaying their purchases in anticipation of holiday sales.
The report from BofA Securities comes as investors and stakeholders look to gauge Best Buy's performance in a competitive retail environment, particularly as the critical holiday shopping season approaches. With the earnings release date nearing, all eyes will be on Best Buy to see how their actual financial results compare to these forecasts.
In other recent news, Best Buy has been under the spotlight following strong Q2 earnings that surpassed expectations, with a 10% rise in earnings per share to $1.34. This performance prompted an increase in full-year earnings guidance. A recovery in comparable store sales was also noted, showing a decrease of 2.3% in Q2, markedly better than the 6.1% decline in Q1.
Best Buy's growth is not confined to product sales; the company is benefitting from its expanding high-margin services, including loyalty and health programs. These services are projected to contribute more significantly as they scale throughout the year and beyond. In addition, Best Buy has partnered with Sealed Air (NYSE:SEE) Corporation to introduce more sustainable packaging options, aligning with the retailer's environmental sustainability objectives.
In terms of analyst attention, firms such as Telsey Advisory Group, Jefferies, Loop Capital, DA Davidson, and Citi have all maintained their Buy ratings on Best Buy. Telsey Advisory Group anticipates a gradual improvement in Best Buy's sales, despite the current slowdown in demand for high-priced discretionary items.
Jefferies, citing recent Gartner (NYSE:IT) PC Shipment data, expressed confidence in Best Buy's performance, maintaining the forecast for the company's comparable store sales for the year at a 1.8% decline. Meanwhile, Loop Capital's latest quarterly pricing study found that Best Buy continues to offer competitive prices across the majority of the product categories examined.
InvestingPro Insights
As Best Buy (NYSE:BBY) approaches its Q3 FY2025 earnings report, InvestingPro data offers additional context to BofA Securities' analysis. Despite the anticipated sales decline, Best Buy's financial health appears robust. The company boasts a market capitalization of $19.13 billion and a P/E ratio of 14.94, suggesting a relatively modest valuation compared to its earnings.
InvestingPro Tips highlight Best Buy's commitment to shareholder returns, having raised its dividend for 6 consecutive years and maintained payments for 22 years. This consistency is particularly noteworthy given the challenging retail environment described in the article. The current dividend yield stands at an attractive 4.35%, which may appeal to income-focused investors.
While BofA Securities maintains an Underperform rating, it's worth noting that Best Buy has seen a significant price uptick over the last six months, with a 25.14% total return. This performance, coupled with analysts' predictions of profitability this year, suggests that the market may be more optimistic about Best Buy's prospects than the BofA rating implies.
For readers interested in a deeper dive into Best Buy's financials and future outlook, InvestingPro offers 5 additional tips and a comprehensive set of real-time metrics to inform investment decisions.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.