Hold Rating for Best Buy Co Amidst Third Quarter Sales Miss and Margin Pressure

In a report released yesterday, Simeon Gutman from Morgan Stanley maintained a Hold rating on Best Buy Co (BBY – Research Report), with a price target of $105.00.

Simeon Gutman’s rating is based on several factors affecting Best Buy Co’s performance. The company is likely to experience a slight miss in comparable sales for the third quarter of 2024, reflecting weaker industry data observed in September and October. This anticipated miss is expected to be in the range of -3% to -2% for domestic sales, which is below the company and market consensus.
Additionally, although Best Buy’s earnings per share may remain in line, challenges are anticipated in maintaining gross margin expansion due to fading tailwinds from services and membership benefits. The company also faces pressure from product costs and potential adverse outcomes from credit card profit-share arrangements. On the expense side, increased advertising spend and the absence of previous vendor support benefits contribute to expectations of SG&A deleverage. These elements collectively justify the Hold rating, considering both short-term challenges and longer-term uncertainties such as valuation re-rating and tariff risks.

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Best Buy Co (BBY) Company Description:

Founded in 1966, Minnesota-based Best Buy Co., Inc. is a consumer electronics company, which provides consumer technology products and services in the US, Canada and Mexico. It operates in two business segments: Domestic and International.