On Friday, Telsey Advisory Group increased its price target for Best Buy Co Inc (NYSE: NYSE:BBY) shares to $115 from $95 while maintaining an Outperform rating. This adjustment follows Best Buy's announcement of second-quarter earnings per share (EPS) that surpassed expectations. The electronics retailer reported a 10% growth in 2Q24 EPS to $1.34, outperforming the FactSet consensus of $1.16 and Telsey's estimate of $1.17.
Best Buy's operating margin for the quarter expanded by approximately 30 basis points to 4.1%, exceeding both the FactSet consensus of 3.6% and Telsey's projection of 3.5%. The company's effective cost control and growth in higher-margin businesses, such as installation, membership, and health services, contributed to this margin improvement.
Additionally, Best Buy's comparable store sales (comps) decline of 2.3% was less severe than the expected 3.2% by FactSet and the 2.9% forecasted by Telsey.
Despite a generally challenging industry and economic environment, Best Buy experienced positive developments, particularly a 6% comp growth in tablet and computing categories during the quarter. This growth is attributed to a replacement cycle and the introduction of new products featuring artificial intelligence (AI).
In light of the better-than-expected performance in the second quarter, Best Buy has revised its full-year 2024 EPS guidance upwards, now expecting $6.10 to $6.35, compared to the previous range of $5.75 to $6.20 and FactSet's consensus of $6.07.
Telsey attributes Best Buy's success to its effective strategy, strong management, and advanced omnichannel capabilities, coupled with optimized real estate and innovative revenue streams.
These factors are believed to position Best Buy favorably for future growth once the industry stabilizes. The new price target of $115 is based on a price-to-earnings (P/E) multiple of approximately 16 times Telsey's revised 2025 EPS estimate of $6.97, up from the earlier estimate of $6.80.
In other recent news, Best Buy has reported improved financial results for the second quarter of fiscal year 2025, despite a challenging consumer environment.
The company has raised its earnings per share guidance for the full year, anticipating a decline in annual sales of 1.5% to 3%. Non-GAAP diluted earnings per share for fiscal year 2025 are projected to be between $6.10 and $6.35. In addition, investment firm Jefferies has increased its price target for Best Buy shares to $116, maintaining a Buy rating.
This adjustment reflects the firm's confidence in Best Buy's performance in the face of a surge in demand for consumer electronics replacements and upgrades. Jefferies has also described Best Buy's third-quarter comparative sales guidance as conservative, suggesting that actual performance could surpass expectations.
InvestingPro Insights
In the wake of Telsey Advisory Group's revised price target for Best Buy (NYSE: BBY), InvestingPro data reveals additional insights into the company's financial health and market position. Best Buy's market capitalization stands at $21.61 billion, reflecting its substantial presence in the retail sector. The company's P/E ratio, a measure of its current share price relative to its per-share earnings, is 15.15, which is in line with industry standards and suggests a balance between stock value and earnings potential.
InvestingPro Tips indicate that Best Buy has a history of dividend reliability, with a track record of increasing its dividend for 6 consecutive years and maintaining dividend payments for 22 consecutive years. This consistency is a positive signal for investors seeking steady income streams. Moreover, the company's strong return over the last month, with a 17.38% price total return, alongside a significant return over the last week, underscores recent investor confidence and market momentum.
For those interested in a deeper dive into Best Buy's performance and future prospects, InvestingPro offers additional tips. There are over 15 InvestingPro Tips available, including insights into the company's industry standing, debt levels, and profitability predictions for the year. To explore these further, visit https://www.investing.com/pro/BBY for a comprehensive analysis.
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