It's been a pretty great week for Best Buy Co., Inc. (NYSE:BBY) shareholders, with its shares surging 12% to US$60.56 in the week since its latest annual results. It was a credible result overall, with revenues of US$44b and statutory earnings per share of US$5.75 both in line with analyst estimates, showing that Best Buy is executing in line with expectations. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Taking into account the latest results, Best Buy's 24 analysts currently expect revenues in 2021 to be US$43.6b, approximately in line with the last 12 months. Statutory earnings per share are predicted to increase 6.5% to US$6.19. Before this earnings report, the analysts had been forecasting revenues of US$44.1b and earnings per share (EPS) of US$6.24 in 2021. So it's pretty clear that, although the analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.
The consensus price target fell 8.5% to US$78.20, suggesting that the analysts might have been a bit enthusiastic in their previous valuation - or they were expecting the company to provide stronger guidance in the annual results. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Best Buy at US$105 per share, while the most bearish prices it at US$55.00. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that sales are expected to reverse, with the forecast 0.02% revenue decline a notable change from historical growth of 2.2% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 4.7% annually for the foreseeable future. It's pretty clear that Best Buy's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Best Buy's revenues are expected to perform worse than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Best Buy going out to 2023, and you can see them free on our platform here..
Even so, be aware that Best Buy is showing 1 warning sign in our investment analysis , you should know about...
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