Best Buy's Top-Line Trends Remain Pressured, Says Analyst

BofA Securities analyst Robert F. Ohmes reiterated an Underperform rating on the shares of Best Buy Co Inc BBY with a price target of $70.00.

Best Buy is expected to report first-quarter FY25 earnings on May 30.

The analyst’s model assumes an enterprise comparable sales decline of (5)%, a modest deceleration from (4.8)% reported in the fourth quarter.

Spending at consumer electronics (CE) & hobby retailers remains negative but improved to (7.2)% in the first quarter vs. (8.6)% in the fourth quarter, per BAC aggregated credit & debit card data, noted the analyst.

While laptop units trended positive in F4Q and Feb, the analyst does not expect innovation in laptops to spur a replacement cycle this year.

The analyst anticipates continued weakness in the appliance category given y/y declines in pricing and higher retail promotions and market share pressures from competitor Costco Wholesale Corporation COST.

A recovery in BBY’s monthly active users on mobile app suggests an improvement in domestic digital comps in the first quarter, opined the analyst.

The analyst forecasts gross margin expansion in FY25, given profitability improvements to membership program which are expected to be another 45 basis points benefit in FY25.

BBY has taken steps to reposition its labor force in 1H to reflect recent sales trends and right-size areas where it expects to see lower volume, said the analyst.

The analyst maintains Underperform rating, given challenging industry trends and uncertainty around the timing of a replacement cycle. 

BBY stock has gained more than 1% in the last 12 months. Investors can gain access to the stock via Invesco S&P Ultra Dividend Revenue ETF RDIV and Invesco S&P 500 High Dividend Low Volatility ETF SPHD.

Price Action: BBY shares are trading higher by 1.97% at $74.13 at the last check Wednesday.

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