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Telsey Upgraded Best Buy before Its Q1 Results

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Best Buy (NYSE:BBY) stock surged about 11% on Monday after Telsey Advisory upgraded it to “outperform” from “market perform.” Telsey Advisory raised its target price for the stock to $90 from $72. Also, UBS increased the stock’s target price to $80 from $74 on Monday.

According to Telsey, Best Buy will emerge as a winner after the COVID-19 pandemic due to several factors including consistent market share gains and strong omnichannel capabilities. Although Best Buy temporarily closed its stores amid the COVID-19 outbreak, its online sales continued to surge. The work-from-home trend due to the pandemic drove higher sales of computers, laptops, and other products like modems. The company saw higher demand for home appliances for food storage and preparation. People stayed home due to restrictions amid the pandemic.

Telsey also thinks that Best Buy will benefit from its growing services and healthcare businesses and gaming console launches this year.

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Best Buy’s position amid COVID-19

Best Buy temporarily closed its stores on March 22 to curb the COVID-19 outbreak. However, the company continued to serve customers through its website and app. Also, the company offered enhanced curbside pick up for a better shopping experience.

Best Buy will likely announce its results for the first quarter of fiscal 2021 on May 21. The company withdrew its fiscal guidance in March due to uncertainty amid COVID-19. Best Buy also suspended share repurchases. However, in a business update provided on April 15, the company stated that it retained about 70% of its sales YoY (year-over-year) despite store closures amid the pandemic. The company also disclosed that its Domestic segment’s online sales have risen 250%. Meanwhile, 50% of the online sales are from customers opting for curbside pickup. Overall, the company’s sales for the nine-week period ended April 4 fell about 5% YoY.

Analysts expect the company’s first-quarter overall revenue to decline 11.5% YoY to $8.09 billion. Also, they estimate the first-quarter adjusted EPS to fall about 58% YoY to $0.43. The loss of store sales and increased expenses due to COVID-19 will likely have a negative impact on the company’s earnings.

Analysts’ recommendations for Best Buy stock

Currently, 16 out of 29 analysts have a “hold” recommendation for Best Buy stock. Meanwhile, 12 analysts recommend a “buy” and one recommends a “sell.” Best Buy has been able to thrive amid intense competition from online retailers, especially Amazon (NASDAQ:AMZN). The company’s Renew Blue transformation plan and the current Best Buy 2020 strategic plan have helped it growing despite multiple challenges.

Several analysts think that the company’s services business helps it enhance customer loyalty and gain additional revenue. Best Buy’s continued investments in its online channels have been favorable. Customers shopped online amid the pandemic.

Best Buy stock has declined by 0.7% year-to-date. The stock has outperformed the S&P 500, which has fallen 8.6% in 2020. Unlike struggling department store chains Macy’s (NYSE:M) and JCPenney, which recently filed for bankruptcy, Best Buy looks better positioned amid the current crisis.

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