The upcoming earnings report from Best Buy is highly anticipated, as it will shed light on whether consumers are finally ready to invest in new consumer electronics. With the current economic landscape, it remains to be seen if demand for consumer electronics is on the verge of a comeback.
Analysts have projected that Best Buy (ticker: BBY) will report adjusted earnings of $1.06 per share, with revenue amounting to $9.52 billion. These figures, according to consensus estimates compiled by FactSet, demonstrate a decline from the previous year’s earnings of $1.54 per share on $10.6 billion in revenue.
The past year has proven to be quite challenging for Best Buy and other players in the consumer electronics market. Inflation and higher interest rates have deterred shoppers from purchasing expensive electronic devices, especially considering the fact that numerous individuals upgraded their gadgets during the pandemic-induced lockdowns.
The latest report on retail sales from the Census Bureau indicates a 3.1% decrease in sales at electronics and appliance stores compared to the previous year. Furthermore, electronic sales were also lower in June compared to the previous month.
These numbers fall in line with the overall trend seen in earnings reports from various retailers. Consumers have become more cautious about their spending habits and have reduced their discretionary purchases.
However, some analysts remain optimistic about Best Buy’s prospects, believing that the worst may be behind them. Sales data from other retailers suggests a slight uptick in consumer demand for electronics during the summer months, as noted by Wedbush analyst Seth Basham in a recent report.
The back-to-school season is also expected to contribute to the increased interest in electronics. While foot traffic at Best Buy was down 10.7% in late May compared to the previous year, Placer.ai data shows that by the first week of July, this decline had narrowed to just 2.4%.
As investors eagerly await Best Buy’s earnings report, they hope to see signs of recovery in the consumer electronics market. The results will provide valuable insight into whether consumers are finally ready to indulge in new tech gadgets and whether the industry is on the brink of a revival.
Best Buy’s Same-Store Sales Show Slight Improvement
By Sabrina Escobar
Best Buy’s same-store sales, which track the performance of stores open for more than a year, are expected to reflect a positive momentum. Analysts on Wall Street forecast a 7% decline in same-store sales for this quarter, which is an improvement from the previous year’s decline of 12.1% and the previous quarter’s drop of 10.1%.
Analyst Cautious About Best Buy Stock
While there is some optimism, an analyst named Basham remains cautious about Best Buy’s stock. He rates it as “Neutral” with a target price of $72. Only 14% of analysts rate the stock as “Buy”, compared to the average of 55% for companies in the S&P 500. Approximately 80% of analysts following Best Buy rate it as “Hold”, while 7% have a “Sell” rating, according to FactSet.
Factors Affecting Demand
Basham notes that demand continues to face pressure, especially in big ticket discretionary home-oriented purchases. Some experts suggest that there is an unwinding of the pent-up demand that arose during the pandemic when consumers spent more time at home. However, there has been a stronger-than-expected sequential improvement, particularly in the month of June.
Potential Opportunity for Investors
A recent analysis highlighted the case for buying Best Buy ahead of the earnings report. It pointed out that Best Buy has exceeded expectations in six out of the past seven quarters. Historically, the stock has gained on the trading day after earnings in six quarters. Additionally, Best Buy’s shares are currently trading at a relatively low valuation, with a price-to-earnings (P/E) ratio of 11.1 times the 12-month forward estimates, below the five-year average of 12.4 times.
Best Buy’s stock closed 1.9% higher on Monday. However, the stock has experienced a loss of 7.7% so far this year.