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Why Best Buy (BBY) Is a Must-Add Stock to Your Portfolio

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Best Buy Co., Inc. (BBY - Free Report) is on a roll, buoyed by its strategic initiatives, store-in-a-store concept and solid earnings surprise history.

Best Buy has exhibited a bullish run in the index. So far in 2016, this Zacks Rank #1 (Strong Buy) stock has surged a whopping 59.3%, apparently outperforming the Zacks-categorized Retail–Consumer Electronic industry growth of 32.2%. Yesterday, the stock hit a 52-week high of $48.56, closing at $48.52. We believe that there is still much momentum left in the stock, which is quite evident from its VGM Score of “A” and long-term earnings growth rate of 11.9%.



Growth Drivers

Best Buy’s “Renew Blue” program achieved tremendous success in fiscal 2016. Notably, the company reached $300 million and intends to improve its annualized operating income by $400 million over the next three years. However, the savings will be offset by incremental investments for future growth.

Best Buy banks on the store-in-a-store concept as it is more viable and profitable to reach its target group. We perceive that this strategy is proving a game changer as it facilitates the display of different brands under one roof, ensuring a larger footfall. The company is leaving no stone unturned to attract consumers and attain incremental revenues, as is evident from its strategic action of opening over 1,400 "Samsung Experience Shops" within its stores.

Looking at Best Buy’s performance, we observed that the company continued with its positive earnings surprise streak for the 16th quarter in a row, as it reported third-quarter fiscal 2017 results. Also, revenues beat the estimate for the third straight quarter and both top and bottom lines increased year over year. Further, online comparable sales increased 24.1%, driven by improved traffic and conversion rates. (Read more: Best Buy Stock Gains on Q3 Earnings & Sales Beat)

Following the sturdy results, the Zacks Consensus Estimate has been witnessing an uptrend over the past 30 days as analysts raised their estimates. Analysts polled by Zacks are convinced about the stock’s upbeat performance. Over the said time frame, the Zacks Consensus Estimate of $3.27 and $3.43 for fiscal 2017 and fiscal 2018 has increased 23 cents and 24 cents, respectively.

BEST BUY Price and Consensus

BEST BUY Price and Consensus | BEST BUY Quote

Stocks to Consider    

Other favorably ranked stocks in the retail space include The Children's Place, Inc. (PLCE - Free Report) , Tilly's, Inc. (TLYS - Free Report) and Zumiez Inc. (ZUMZ - Free Report) , all flaunting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here..

The Children's Place, with a long-term earnings growth rate of 10.3%, has gained roughly 97.6% year to date.

Tilly’s, with a long-term earnings growth rate of 15.5%, has skyrocketed 126.9% in the past six months.

Zumiez, with a long-term earnings growth rate of 15%, has jumped 65% year to date.

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