JPMorgan Identifies This Stock as Being in “Investors’ Blind Spot”

Analysts at JPMorgan have included Best Buy in their “Analyst Focus List,” citing that investors may have underestimated the potential for the electronics retailer to experience increased demand in 2025.

In a recent note to clients, the analysts expressed optimism that the company’s performance is set to rebound from COVID-related challenges and that it will benefit from the emergence of new computing technologies and a possible recovery in the housing market.

They stated, “While investors are rightfully focused on the lower-risk high-cyclical plays, we believe Best Buy is currently overlooked, especially with rising replacement demand projected for 2025, given the time elapsed since the onset of COVID, the introduction of new computing technologies, and the impact of housing turnover on the demand for TVs and appliances.”

The analysts also pointed out that suppliers view Best Buy as a key partner, which is an important factor for investors seeking higher beta stocks with cyclical growth potential.

In August, Best Buy raised its annual profit forecast and delivered stronger-than-anticipated financial results in its fiscal second quarter. The company announced quarterly earnings per share of $1.34, exceeding the consensus estimate of $1.16, and reported revenues of $9.29 billion, slightly surpassing the expected $9.24 billion.

Comparable sales in the enterprise segment fell by 2.3%, an improvement from a 6.2% decline in the previous year and better than the analysts’ expectation of a 3.17% drop. International comparable sales decreased by 1.8%, which was better than the anticipated 2.22% decline and an improvement from the last year’s 5.4% dip. In the U.S., comparable sales also declined by 2.3%, outperforming the estimated 3.33% decline.

The gross margin was reported at 23.5%, aligning with analysts’ expectations and showing a slight increase from 23.2% the prior year.

Looking forward, Best Buy has elevated its annual earnings per share guidance to a range of $6.10-$6.35, up from the previous forecast of $5.75-$6.20 and above Wall Street’s estimate of $6.08. However, the company has adjusted its full-year revenue outlook downward to a range of $41.3-$41.9 billion.