Best Buy Shares Slump Over 13% After Q4 Sales Forecast Disappoints

Best Buy shares slumped over 13% in pre-market trading on Tuesday after the Richfield, Minnesota consumer electronics retailer disappointed markets with a lower-than-expected comparable sales forecast for the fourth quarter.

According to Reuters news, Best Buy forecast comparable sales would fall between 2% and 1% in the fourth quarter, the midpoint of which is below expectations of 0.1% growth. Following that Best Buy shares slumped over 13% to $119.90 in pre-market trading on Tuesday.

Domestic revenue of $10.99 billion increased 1.2% versus last year. The increase was primarily driven by comparable sales growth of 2.0%, which was partially offset by the loss of revenue from permanent store closures in the past year, the company said.

Executive Comments

“We are looking forward to a strong holiday season and believe we are extremely well-positioned with both the tech customers want and fast and convenient ways to get it,” said Matt Bilunas, Best Buy CFO.

“We are committed to driving initiatives that will deliver future growth and our Q4 outlook reflects continued investments in our new membership program, technology, advertising and our health strategy.”

Best Buy Stock Price Forecast

Fourteen analysts who offered stock ratings for Best Buy in the last three months forecast the average price in 12 months of $136.31 with a high forecast of $157.00 and a low forecast of $100.00.

The average price target represents a -1.22% change from the last price of $138.00. From those 14 analysts, eight rated “Buy”, five rated “Hold” while one rated “Sell”, according to Tipranks.

Technical analysis suggests it is good to buy as 100-day Moving Average, and 100-200-day MACD Oscillator signals a strong buying opportunity.

Morgan Stanley gave the base target price of $120 with a high of $150 under a bull scenario and $85 under the worst-case scenario. The firm gave an “Equal-weight” rating on the consumer electronics retailer’s stock.

Several other analysts have also updated their stock outlook. Citigroup raised the price target to $118 from $100. Piper Sandler lifted the target price to $155 from $150.

Analyst Comments

“Best Buy (BBY) is a best in class retailer led by a capable management team, and we are positive on the longer-term opportunity for the business and stock. BBY’s leading position in a healthy category and strength in key Retail fundamentals including merchandising, labour management, supply chain and omnichannel underpin our view,” noted Simeon Gutman, equity analyst at Morgan Stanley.

“We think BBY can sustain >5% EBIT margins after pulling forward its margin target by 5 years during the COVID-19 pandemic. This is reliant on generating SG&A efficiencies, which we believe are possible given BBY’s strong track record in this arena.”

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