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Best Buy Hits New 52-Week High: Will the Uptrend Continue?

Zacks Equity Research

Best Buy Co., Inc. BBY hits a new 52-week high of $84.06, before closing the session a tad lower at $83.83 on Dec 11. Shares of this Zacks Rank #2 (Buy) company have rallied approximately 24.2% in the past three months compared with the industry’s rise of 17.1%. The company is gaining from supply chain and cost-containment efforts, focus on developing omnichannel capabilities, and partnerships with vendors.

Moreover, the company’s shares have improved 2.8% since it reported third-quarter fiscal 2020 results on Nov 26. During the quarter, both top and bottom lines surpassed the Zacks Consensus Estimate and improved year over year. Notably, this marked the eighth straight quarter of earnings beat. Additionally, the robust performance was followed by a raised guidance for fiscal 2020.

Best Buy now envisions adjusted earnings per share of $5.81-$5.91, up from the prior forecast of $5.60-$5.75. The company now forecasts Enterprise revenues of $43.2-$43.6 billion compared with the previous guidance of $43.1-$43.6 billion. Furthermore, comps are expected to grow 1-2% compared with the prior view of 0.7-1.7% increase. 

Is There More Room to Run?

Best Buy remains focused on the next phase of its “Building the New Blue” program — Building the New Blue: Chapter Two — which aims at pursuing growth opportunities, better execution in key areas, cost containment and investing in people and systems. In this regard, management targets $600 million of cost reduction by fiscal 2021. Apart from this, it has been progressing well with programs like Total Tech Support, which provides support for fixing computers, laptops, appliances, smart home devices and connected devices.

Further, the company is making efforts to strengthen its healthcare technology business by undertaking buyouts in this space. Its purchases include GreatCall, Critical Signal Technologies and BioSensics. Moreover, Best Buy expanded its In-Home Advisor program to core U.S. markets. It is also committed toward strengthening partnerships with vendors, offering services and solutions to meet varied customer needs, and optimizing costs. 

Such upsides along with the supply-chain transformation plan are expected to boost the company's performance. Keeping in these lines, management continues to envision enterprise revenues of approximately $50 billion, with adjusted operating income rate of 5% by 2025. This consumer electronics retailer also intends to reduce costs by about $1 billion in the said period.

All said, we expect the company’s robust prospects to help it keep the stellar show on.

Other Key Picks

Boot Barn Holdings BOOT has an expected long-term earnings growth rate of 17%. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

DICK’S Sporting Goods DKS, also a Zacks Rank #1 stock, has an expected long-term earnings growth rate of 6.5%.

Target Corporation TGT has a long-term earnings growth rate of 7.6% and a Zacks Rank #1.

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