Best Buy Could Be Gearing Up For Comeback, Analyst Says

Telsey Advisory Group analyst Joseph Feldman maintained an Outperform rating on Best Buy (BBY), projecting a return to growth in the second half of 2025 despite near-term macro headwinds. For Q2 2025, Feldman forecasts EPS of $1.21 on $9.2 billion in sales, anticipating a 40 basis point operating margin contraction due to tariffs and inflation. However, he sees FY2025 EPS at $6.25 (above consensus) and FY2026 EPS at $6.78, driven by new product cycles like Nintendo Switch 2, AI innovation, and growth in higher-margin services, with diversified sourcing strategies mitigating tariff risks. BBY shares reacted positively, rising 3.99% following the outlook.

Analysis

An analyst from Telsey Advisory Group has maintained an Outperform rating on Best Buy (BBY) with a $90 price target, signaling confidence in a long-term recovery despite immediate macroeconomic challenges. The analysis anticipates a stabilization of results, with a projected return to growth in the second half of 2025. Near-term forecasts for Q2 2025 reflect ongoing headwinds, with sales expected to decline 1.4% to $9.2 billion and operating margins contracting approximately 40 basis points to 3.7% due to tariff pressures and inflation. However, the outlook for the full fiscal year 2025 and beyond is more robust, with a projected EPS of $6.25, surpassing the consensus of $6.16, and a further increase to $6.78 in fiscal 2026. Key growth drivers identified include a new product cycle, notably the Nintendo Switch 2, a replacement cycle for pandemic-era purchases, and strategic expansion into higher-margin segments like advertising, marketplace, and health services. While tariff risks persist, the report notes that Best Buy's diversified sourcing strategies are positioned to mitigate the financial impact. The market reacted positively to this outlook, with BBY shares climbing 3.99% to $75.30.

Key Decisions for Investors

• Investors should weigh the projected long-term earnings growth, driven by new product cycles and margin expansion, against the expected near-term weakness in revenue and operating margins for Q2.
• Monitor upcoming earnings calls for specific commentary on the effectiveness of diversified sourcing in offsetting tariff impacts and for early sales data from key product launches like the Nintendo Switch 2.
• Consider the potential upside to the $90 price target, as the current share price of $75.30 does not fully reflect the analyst's fiscal 2026 EPS forecast of $6.78 and projected 1.6% comparable sales growth.