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Best Buy Co Inc - Stock Quote BBY

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Morningstar's Best Buy Co Inc Stock Analysis

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Strong Analyst Day Guidance Suggests Structurally Stronger Postpandemic Best Buy; Shares Attractive

Sean Dunlop Equity Analyst

Analyst Note

| Sean Dunlop |

We take a positive stance on narrow-moat Best Buy's fourth-quarter earnings and analyst day presentation, with all signs suggesting that the retailer has emerged from the pandemic a structurally stronger business. Quarterly earnings were solid but unspectacular, with $51.8 billion in annual sales and $9.84 in diluted EPS narrowly edging our previous forecasts of $51.7 and $9.71, respectively. Far more importantly, a digital business that has doubled its prepandemic run-rate (to 34% of sales, or $17.5 billion), meaningful sales leverage, and upside from the firm's Totaltech loyalty program, nascent advertising business, and Health segment point to a solid future for the consumer electronics stalwart. We expect to raise our $116 fair value estimate by about 10%, with roughly 4% of the change attributable to the removal of our prior expectation for a 5-point bump in the U.S. tax rate.

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Best Buy Co Inc's Company Profile

Business Description

With $51.8 billion in fiscal 2022 sales, Best Buy is the largest pure-play consumer electronics retailer in the U.S., with roughly 10.6% share of the aggregate market and north of 40% share of offline sales, per our calculations, CTA industry, and Euromonitor data. The firm generates the bulk of its sales in-store, with mobile phones and tablets, computers, and appliances representing its three largest categories. Recent investments in e-commerce fulfillment, accelerated by the COVID-19 pandemic, have seen the U.S. e-commerce channel roughly double from prepandemic levels, with management estimating that it will represent a mid-30% proportion of sales moving forward.

7601 Penn Avenue South
Richfield, MN, 55423
T +1 612 291-1000
Sector Consumer Cyclical
Industry Specialty Retail
Most Recent Earnings Jan 31, 2022
Fiscal Year End Jan 29, 2023
Stock Type Cyclical
Employees 105,000

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