Best Buy Stock Will Benefit From the ‘Year of the Home’ - Barron's

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People wearing face masks walk past a Best Buy store near Union Square on June 25, 2020 in New York City.

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Best Buy stock has edged up 2% this year, ahead of the broader market, but below the gains seen by some essential retailers. Yet Guggenheim says investors aren’t giving the shares enough credit, and they will be pleasantly surprised by the electronics retailer’s sales trends.

Analyst Steven Forbes reiterated a Buy rating on Best Buy (ticker: BBY) Thursday and raised his price target by $10 to $100. The move comes after he spoke with the head of the largest buying group in the consumer electronics industry, who said 100% of the more than 500 dealers he works with reported revenue growth during June.

In addition, the group said trends also have been improving month-over-month since April, which has led to less need for promotions. This is good news on its own, but especially encouraging given that major smartphone and videogame console launches—from Apple (AAPL), Sony (SNE) and Microsoft (MSFT)—are due out later this year, creating potential supercycles for retailers like Best Buy that sell their products.

Indeed, Forbes writes that the company will be a beneficiary of the “year of the home.” Although supply chains do seem strained in some areas, he believes Best Buy is one of the best-positioned companies to manage its inventory levels. In addition, market expectations haven’t caught up to the company’s potential. Current consensus estimates don’t appear to be factoring in any improvement in same-store sales trends from May, which he thinks is too conservative, given how many people are working (and playing) at home, even as some cities and states reopen.

Best Buy is reopening many of its stores, but also offering omnichannel options, like contactless pickup, to let consumers shop as they choose. That’s good news, given that recent sales trends showed that Best Buy suffered from store closures (and high expectations). Yet many analysts agree with Forbes, saying the company will be a long-term winner when we finally emerge from the pandemic.

The shares are up 1.1% to $89.39 in recent trading. 

Write to Teresa Rivas at teresa.rivas@barrons.com

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