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Best Buy’s Stock Struggles, Will it Recover in 2024?

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Note: Best Buy’s FY’23 ended on January 28, 2023

Best Buy’s Q3 Performance Expectations

Best Buy (NYSE: BBY), the retail giant in consumer electronics, is expected to reveal a slight boost in revenues and earnings post-fiscal Q3. The current market conditions have stunted growth, with factors such as inflation and supply chain disruptions taking a toll on consumer electronics sales. Troubles are expected to continue in the current fiscal year but the retailer remains optimistic, foreseeing a market rebound and record-setting sales in fiscal 2025.

Stock Decline and Underperformance

Best Buy’s stock has faced a harsh 30% decline from early January 2021, markedly underperforming the S&P 500 over the last three years. The company managed only a 2% return in 2021, followed by -21% in 2022, and -15% in 2023 (YTD). In comparison, the S&P 500 tallied 27% in 2021, -19% in 2022, and 18% in 2023 (YTD), signaling Best Buy’s consistent underperformance. The challenging market conditions have made it difficult for individual stocks to outperform the S&P 500, even for industry heavyweights like AMZN, TSLA, and TM, and megacap stars like GOOG, MSFT, and AAPL.

Forecast and Valuation

It is estimated that Best Buy’s valuation is at $79 a share, 6% higher than the current market price. The company’s expected Q3 2024 revenues and earnings per share (EPS) are slightly higher than the consensus estimates. The electronics retailer is projected to have $9.6 billion in Q3 2024 revenues and an EPS of $1.22, improving upon the prior year quarter.

Market Comparison

It is essential to compare Best Buy against its peers to truly understand its performance. The data on the table below reflects Best Buy’s returns in comparison with the S&P 500 and Trefis Reinforced Value Portfolio, highlighting its challenges in recent years.

 Returns Nov 2023
MTD [1]
YTD [1]
Total [2]
 BBY Return 2% -15% 60%
 S&P 500 Return 8% 18% 102%
 Trefis Reinforced Value Portfolio 7% 26% 547%

[1] Month-to-date and year-to-date as of 11/20/2023
[2] Cumulative total returns since the end of 2016

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