After some downtime, Best Buy (BBY) is resurfacing in the eyes of Wedbush’s Michael Pachter. The analyst upgrades the rating from Underperform to Neutral, but maintains a price target of $65. What makes him do it? The electronic giant’s third-quarter earnings. (To watch Pachter’s track record, click here)
Revenue for BBY was $9.59 billion dollars versus Pachter’s estimate of $9.59 billion dollars, consensus of $9.57 billion and guidance of between $9.4 – 9.5 billion. Some items to applaud for its contribution to revenue are: mobile phones, gaming, appliances, wearables, headphones, and smart home devices. Non-GAAP EPS from continuing operations was $0.93 versus Pachter’s estimate of $0.79, consensus of $0.85, and guidance of $0.79 – 0.84. We also have an idea about what’s ahead for Q4 – revenue guidance of $14.4 – 14.8 billion and EPS guidance of $2.48 – 2.58.
“Best Buy has consistently defied our expectations, and the company appears to have settled on the right formula for long-term growth. We applaud Best Buy for its many accomplishments, not least of which is achieving the difficult financial targets it has set for itself year after year. While we still harbor some concerns, including competition from Amazon, we think Best Buy is poised to deliver on its promises in the coming years,” Pachter said.
“We are adjusting our FY:19 estimates for revenue to $42.9 billion from $43.0 billion and for EPS to $5.26 from $5.13, Q3 results and revised FY guidance. We are adjusting our FY:20 estimates for revenue to $42.6 billion from $41.9 billion and for EPS to $5.46 from $5.30, reflecting better comps than we previously estimated,” Pachter explained.
The analyst applauded Best Buy more, noting the company thrived despite heavy competition from Amazon. And though Pachter predicts the competition will continue, he says the electronics giant has firmly established itself as “the last man standing” in consumer electronics retail. The company has “maintained share in the face of heavy odds by focusing on customer service.”
Though Pachter’s Neutral rating is in line with the majority, his accolades may break the mold for BBY. TipRanks finds out of 17 analysts, only 4 are bullish, 13 are sidelined and none are bearish. The consensus price target stands at $75.15, showing just about a 21% upside. (See BBY’s price targets and analyst ratings on TipRanks)