Shares in Best Buy Co Inc (NYSE:BBY) soared Tuesday after it reported better-than-expected sales and earnings in the most recent quarter, proving once again that it’s tough to count Best Buy stock out.
For a company with no future, BBY sure is hard to kill. The consumer electronics chain has been hanging on by its fingernails against Amazon.com, Inc (NASDAQ:AMZN), Wal-Mart Stores, Inc. (NYSE:WMT) and e-commerce in general for five years, and yet reports of its death always prove premature.
That has made Best Buy stock a poor buy-and-hold over the years. Shares are up 36% over the past half-decade vs. a gain of 85% for the broader market. As a trade, however, BBY has offered many opportunities for outperformance. Believe it or not, for the year-to-date, Best Buy stock is actually ahead of the S&P 500.
Tuesday’s market action should only extend that lead. BBY stock is up 15% in premarket trade.
You can chalk that up to the fact that Best Buy has never lost its ability to confound Wall Street expectations in a good way. For example, in the most recent quarter, same-same sales — a critical retail industry metric — rose when analysts expected them to fall.
BBY Stock: More of a Trade than an Investment
In the most recent quarter. Best Buy earnings rose to $198 million, or 61 cents a share, from $164 million, or 46 cents a share, in the same period a year ago. On an adjusted basis — which is what analysts care about — earnings came to 57 cents a share. That beat the Street’s forecast for 43 cents a share by a wide margin, according to a survey by Thomson Reuters.
Like comparable-store sales, total revenue actually inched up when its was expected to fall. The top line expanded to $8.533 billion from $8.528 billion. Analysts’ average estimate stood at $8.4 billion. As for the aforementioned comp sales, they increased 0.8% when the Street was looking for a 0.4% drop.
The keys to the quarter were brisker sales of appliances and consumer electronics and cost controls, BBY said, but the exciting news came from e-commerce.
As CEO Hubert Joly pointed out in a news release:
“We saw continued positive momentum in our online sales — delivering a second straight quarter of nearly 24% growth.”
As promising as the latest quarter was, Best Buy is trying to keep the bar low on Q3. The company expects adjusted earnings of 43 cents to 47 cents a share, while the Street is looking for 45 cents a share.
It’s hard to call Best Buy stock a buy after Tuesday’s huge move. That’s especially true given it routinely coughs up hard-won gains — and more — if you stick around long enough.
BBY does, however, remain one of the more interesting names for traders or tactical investors.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.
