Investor Caution: Best Buy's Q2 Revenues To Slump, Analyst Still Calls It Key Player

Telsey Advisory Group analyst Joseph Feldman reiterated a Market Perform rating on Best Buy Co., Inc.  BBY with a price target of $78.

Best Buy will report 2Q23 earnings on Tuesday, August 29.

The analyst believes Best Buy's business will likely experience

continued pressure related to the challenging macro trends weighing on discretionary consumer demand amid inflation and elevated interest rates.

The analyst projects Q2 EPS of $1.07 vs. the FactSet consensus (FS) of $1.06

Feldman estimates a sales decline of 7.5% to $9.6 billion, with a total comp of (6.8%) vs. FS at (7.0%) and guidance of (8.0%)-(6.0%).

The analyst projects inline operating margin contraction of ~90 bps to 3.2%, with gross margin expansion of 51 bps to 22.7%, helped by the redesigned membership programs and lapping increased costs and promotions last year.

However, helping offset difficult comparisons and macro headwinds, Best Buy should benefit from solid execution and initiatives, including the new My Best Buy membership program (more personalized with multi-tier offerings) that rolled out on June 27.

For 2023, Feldman forecasts EPS of $6.23 vs. FS at $6.07 and the guidance of $5.70-$6.50.

The analyst forecasts inline operating margin contraction of ~50 bps to 3.9% vs. the guidance of 3.7%-4.1%.

In the long term, the analyst continues to expect Best Buy to remain one of the better operators in retail, with a differentiated store and digital experience, efficient operations, solid cash flow generation, and a strong

management team. 

The company also continues to make progress on key initiatives, such as My Best Buy and health, Feldman adds.

Price Action: BBY shares are trading higher by 0.17% to $78.72 on the last check Monday.