Best Buy Blows Away Q2 Estimates

Best Buy Co. Inc. (BBY) is trading higher by more than 4% in Tuesday’s pre-market session after blowing away Q2 2021 top and bottom line estimates. The electronics and appliance retailer posted a profit of $2.98 per-share during the quarter, $1.09 higher than expectations, while revenue rose a healthy 19.6% year-over-year to $11.85 billion, beating consensus by more than $300 million. The company raised both Q3 and fiscal year 2021 guidance, indicating robust sales across all major categories.

A Year of Sub Par Performance

Even so, the stock has gone nowhere in the last 12-months, trading at the same price level first struck on this date last year. It more than doubled off the March low to reach that lofty level, setting off long-term overbought technical readings that are still impacting performance.  Of course, we’ve seen this story play out with other American retailers this year, translating into sub-par returns at big names that include Amazon.com Inc. (AMZN) and Walmart Inc. (WMT).

Best Buy’s long-term outlook remains highly bullish despite a year of sideways action, with Telsey Advisory Group analyst Joseph Feldman noting that “We expect Best Buy to further strengthen its position, with steady market share gains, stable profitability, leading Omni-channel capabilities, solid cash flow generation, a healthy balance sheet, and a strong management team. Despite all these positives, Best Buy’s valuation remains relatively inexpensive.”

Wall Street and Technical Outlook

Wall Street consensus has eased to an ‘Overweight’ rating in the last three months, based upon 10 ‘Buy’, 3 ‘Overweight’, 12 ‘Hold’, 1 ‘Underweight’, and 1 ‘Sell’ recommendation. Price targets currently range from a low of $77 to a Street-high $150 while the stock is set to open Tuesday’s session about $10 below the median $127 target. The positive post-news reaction raises odds that price will make a beeline into the median target in coming sessions.

Best Buy topped out at 84.37 in August 2018 and cleared resistance at that level in July 2020. The subsequent rally was short-lived, stalling above 115 in November. February and May 2021 breakout attempts failed, reinforcing horizontal resistance that now stretches up to 128. The current uptick could enter that contested zone in coming sessions but a breakout will be difficult, given mixed price action in other big retailers.

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Disclosure: the author held no positions in aforementioned securities at the time of publication.