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Best Buy Hits New 52-Week High: Is There More Room to Run?

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Best Buy Co., Inc. BBY hits a new 52-week high of $90.74, before closing the session a tad lower at $90.65 on Jan 10. On a further encouraging note, it has had a remarkable run on the bourses over the past three months, with shares gaining 31.9%, outperforming the industry and Retail-Wholesale sector’s growth of 26.2% and 8.1%, respectively. Stellar third-quarter fiscal 2020 performance and an impressive outlook for the fiscal year have likely contributed to the rally.

Further, analysts remain bullish on the stock. Over the past 60 days, the Zacks Consensus Estimate for its fiscal 2020 earnings has been revised up 3.3% to $5.94. Additionally, the long-term earnings growth rate of 8.7% and a VGM Score of B portray its inherent strength.

These apart, a lot more seems to be going in favor of the Zacks Rank #2 (Buy) stock.



Reasons Behind the Rally

Best Buy’s focus on developing omnichannel capabilities, supply chain and cost-containment efforts along with strengthening partnerships with vendors bode well. It has been making significant progress in the healthcare technology business by undertaking buyouts. Some of its notable acquisitions include GreatCall, Critical Signal Technologies and BioSensics.

Moreover, it has been progressing well with programs like Total Tech Support that provides support for fixing computers, laptops, appliances, smart home devices and connected devices. Further, Best Buy expanded its In-Home Advisor program to the core U.S. markets.

Also, the company remains on track with the next phase of its “Building the New Blue” program called “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. The consumer electronics retailer also intends to reduce costs by $1 billion by 2025.

Moving on, Best Buy has highlighted supply-chain transformation as one of its key growth initiatives. This includes strengthening partnerships with vendors, focusing on offering services and solutions to meet varied customer needs. These endeavors are expected to boost the company's top line and overall profitability. Management continues to envision enterprise revenues of $50 billion, with an adjusted operating income rate of 5% by 2025.

Wrapping Up

All said, we believe that strategic buyouts to tap into the health space, solid partnerships with vendors and cost-cutting efforts will help the company drive its performance further. Its upbeat fiscal view is a testimony to the same.

For fiscal 2020, management envisions adjusted earnings of $5.81-$5.91 per share, suggesting rise from $5.32 reported in fiscal 2019. The company forecasts Enterprise revenues of $43.2-$43.6 billion, whereas it reported $42.9 billion in the previous year. 

Check Out These Other Solid Picks

Zumiez Inc ZUMZ has a long-term earnings growth rate of 12%. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Tilly's, Inc TLYS presently has a long-term earnings growth rate of 11% and a Zacks Rank #1.

Target Corp. (TGT - Free Report) has a long-term earnings growth rate of 7.6% and a Zacks Rank #2 at present.

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