On Wednesday, Evercore ISI maintained its "In Line" stance on Best Buy (NYSE:BBY), echoing a consistent price target of $100.00. The firm initiated a positive tactical call, anticipating an 8-10% rise in the company's shares, potentially reaching $95-$100. This forecast aligns with InvestingPro analysis, which indicates Best Buy is currently undervalued. Trading at a P/E ratio of 14.78x with a market capitalization of $18.7 billion, the company's valuation appears attractive relative to the market.
Evercore ISI's outlook is partly influenced by its recent Holiday Survey, which suggests a constructive trend in holiday shopping, with consumer electronics sales showing signs of improvement. According to the survey, Best Buy is well-positioned to benefit from these trends, particularly among heavy consumer electronics spenders planning to spend $500 or more.
The survey also placed electronics among the top three net gainers for spending intentions, with Best Buy ranking favorably. As a prominent player in specialty retail, Best Buy maintains a strong market position, supported by a healthy 4.3% dividend yield and a seven-year streak of dividend increases, according to InvestingPro data.
The firm's expectations for Best Buy's fourth-quarter performance are in line with Wall Street's forecasts, predicting a comparable store sales (comp) decrease of 1% and earnings per share (EPS) of $2.41. This is slightly more optimistic than the consensus, which anticipates a 1.5% comp decline and $2.39 EPS.
Supporting this view, November's Retail Sales data revealed a month-over-month acceleration of 330 basis points in electronics and appliances sales, climbing to a positive 1.2%. The company's last twelve months revenue stands at $42.23 billion, though InvestingPro data shows 19 analysts have revised their earnings expectations downward for the upcoming period.
Evercore ISI's positive Tactical Trade Idea for Best Buy is set to remain in effect through the Consumer Electronics Show (CES) in Las Vegas, scheduled for early January, which the firm plans to attend. However, the analyst also noted potential risks to Best Buy's performance.
These include the possibility of continued market share loss in appliances, which could negate any category strength, as well as the potential impact of gross margin degradation if Best Buy resorts to aggressive promotions.
Additionally, the lingering issue of tariffs could dampen investor sentiment.
In other recent news, Walmart (NYSE:WMT) and Amazon (NASDAQ:AMZN) have reported record-breaking sales during the Black Friday and Cyber Monday events.
These e-commerce giants, along with online retailers Shein and PDD Holding's Temu, are expected to conclude the holiday season with stronger performances. Walmart and Amazon saw sales increases of 3% and 6% respectively, while Target (NYSE:TGT) and Best Buy experienced declines. Walmart and Amazon's sales were driven by popular items such as pre-owned Rolex watches, Pokemon cards, and Fire TV streaming devices.
Meanwhile, Best Buy's stock outlook has been adjusted by Loop Capital, which lowered its price target but maintained a Buy rating. Guggenheim also maintained a Buy rating on the company's stock, with an adjusted price target reflecting a mixed performance in the third quarter. Despite a challenging quarter, Best Buy maintained a non-GAAP operating income rate of 3.7%.
KeyBanc analysts reported a shift in consumer behavior during Black Friday, with online spending showing significant strength compared to in-store traffic. Total (EPA:TTEF) retail sales, excluding automobiles, rose by 3.4% year-over-year on Black Friday, exceeding Mastercard (NYSE:MA)'s holiday forecast.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.