Best Buy BBY has benefited from the remote work and school push, as people buy laptops, tablets, and more. The consumer electronics giant topped second quarter estimates at the end of August and some of its other fundamentals make BBY worth considering at the moment, despite the broader market volatility and uncertainty.
Stuck at Home Boost…
Like nearly every retailer, big and small, Best Buy has boosted its e-commerce offerings in recent years. This push has paid off in 2020 as many consumers try to avoid in-store shopping. BBY topped our Q2 estimates on August 25, with revenue up 4% and adjusted earnings up 58% for the three-month period end on August 1.
Meanwhile, BBY’s domestic comparable sales popped 5%, with comparable online sales up a whopping 242%. Investors should note that unlike Walmart WMT and other big retailers, Best Buy’s stores were open by appointment only for the first six weeks of the quarter. “Products that help people work, learn, connect and cook at home, like computing, appliances and tablets, were the largest drivers of our sales growth for the quarter,” CEO Corie Barry said in prepared remarks.
“Trends across most categories and services improved materially throughout Q2 as we opened our stores more broadly for shopping, especially categories like large appliances and home theater that benefit from more experiential shopping.”
BBY shares have surged 110% off the March lows to crush Amazon AMZN, Target TGT, and the broader retail industry. This is part of a much longer and larger run that the nearby chart highlights. Best Buy sits about 9% off the records it hit right before its Q2 release, which might set up a better buying opportunity for those high on the stock.
Despite its outperformance, BBY trades at a big discount compared to the retail sector at 14.6X forward 12-month earnings vs. 30.7X. This also comes in below its highly-ranked Consumer Electronics industry average of 19.3X and near its own 12-month median.
On top of that, Best Buy’s earnings revisions have turned far more positive since its report to help it earn a Zacks Rank #1 (Strong Buy) at moment, alongside its “B” grade for Value and an “A” for Growth in our Style Scores system. Plus, Best Buy’s 2.08% dividend yield crushes the 30-year Treasury’s 1.45%, the 10-year’s 0.66%, and the S&P 500's 1.73% average.
Looking ahead, Zacks estimates call for BBY’s adjusted Q3 EPS to jump 47% to $1.66 per share on 11% stronger sales that would see it hit $10.83 billion. And Best Buy’s growth is set to continue in the fourth quarter and beyond.
The economic environment remains challenging and even as things return closer to normal, the remote work and schooling landscape might be in place for a while. Best Buy is set to benefit from this world and let’s also remember that consumer electronics are only becoming more important to more people.
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