Best Buy Soars On Q3 Earnings Beat, But Tariffs Remain A Concern

Best Buy Co Inc BBY shares hit a 52-week high Tuesday after reporting a third-quarter earnings beat.

Tariffs At Front Of Mind For Best Buy Analysts 

High-quality growth is priced into Best Buy shares, as investors are “increasingly willing to pay a premium” for the retailer's sustained growth and momentum, Bank of America Merrill Lynch analyst Curtis Nagle said in a Tuesday note. 

The analyst said he does not necessarily disagree with this sentiment, but Nagle added the company is now trading at premium levels and said he sees potential headwinds in the form of more tariff pressure in 2020, weakness in TVs and gaming and high expectations set at the company’s analyst day in September.

Bank of America reiterated a Neutral rating and raised its price target from $70 to $84.

Tariffs remain the biggest catalyst for Best Buy shares, Wells Fargo analyst Zachary Fadem said in a Tuesday note, adding that he's waiting for more clarity. 

“Thus far, it appears Best Buy is effectively managing the tariff situation, and considering more cautious second-quarter commentary, it appears that underlying trends are proving better-than-feared on the back of continued job/wage growth, higher consumer confidence and solid cost management,” the analyst said. 

Wells Fargo reiterated a Market Perform rating and raised the price target from $65 to $85.

KeyBanc Capital Markets analyst Bradley Thomas had a similar sentiment, saying he believes the company is positioned for a strong holiday season, but risk from tariffs exists at a valuation that KeyBanc views as reasonable. 

KeyBanc maintained a Sector Weight rating.

Raymond James Bullish On Best Buy's Future

The holidays came early this year for Best Buy investors, with another beat-and-raise in the third quarter, Raymond James analyst Matthew McClintock said in a Tuesday note. 

Tariff concerns and a softening of the television cycle are a factor, the analyst siad, but he added that the company will continue to take market share in services, driving multiple expansion. The high end of fourth-quarter guidance implies the retailer will see comp growth during the holiday quarter, he said. 

Raymond James maintained a Strong Buy on Best Buy with a $100 price target.

RBC Capital Markets analyst Scot Ciccaarelli said Best Buy’s raised guidance attempts to assume the worst-case scenario for potential tariffs.

Although the fourth quarter is difficult to predict for Best Buy, the company’s track record and service opportunities have RBC aggressively looking for an opportunity to become more constructive on the company, the analyst said. 

RBC maintained a Sector Perform rating and raised the price target from $74 to $86.

Tigress: Upside Still Exists

Key investments in digital initiatives and omni-channel fulfillment are driving strong results for Best Buy, said Tigress Financial Partners analyst Ivan Feinseth. 

The Dec. 15 tariff on primarily consumer electronics will likely be delayed, as recent negotiations between the U.S. and China have been favorable, the analyst said. 

"I believe further upside exists from current levels and would be an aggressive buyer below $75 a share ahead of the upcoming holiday season." 

Best Buy shares were down 1.4% at $80.43 at the time of publication Wednesday. 

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Photo by Miosotis Jade via Wikimedia.