BBY: Alternative Profit Streams Will Support Future Earnings And Margin Expansion

Analysts have nudged our Best Buy fair value estimate slightly lower to approximately $83.90 per share, reflecting a modestly higher discount rate, even as they raise price targets into the low to high $90s on continued market share gains, improved comps, and expectations that newer initiatives and alternative profit streams will support durable earnings and margin growth.

Analyst Commentary

Bullish analysts remain broadly constructive on Best Buy, pointing to consistent execution, market share gains, and rising alternative profit streams as key supports for both earnings power and valuation. Target price hikes into the low to high $90s highlight increasing confidence that recent momentum can extend beyond the near term.

At the same time, more cautious voices emphasize that the recovery is still uneven across categories and that current expectations already embed a meaningful improvement in trends, keeping some firms on the sidelines despite recent strength.

Bullish Takeaways

• Bullish analysts point to strong recent comps and margin upside as evidence that operational execution and cost discipline can sustain earnings growth, supporting price targets above the mid $80s.
• Improving trends across major categories such as computing, mobile, and core consumer electronics are seen as validating the view that Best Buy is gaining share in a challenged backdrop.
• Several research teams expect alternative profit streams, including retail media and other high margin initiatives, to drive structural gross margin expansion and push EPS above $7 by 2026, supporting upside to intrinsic value.
• JPMorgan flags the latest quarter as a potential inflection point, with accelerating data trends viewed as a catalyst that could rerate the stock higher as investors gain confidence in the growth trajectory.

Bearish Takeaways

• Bearish analysts argue that while near term performance is solid, longer term upside still depends on a rebound in higher margin product categories, which remains uncertain and tempers valuation expansion.
• Some firms maintain Hold or Equal Weight ratings, noting that November trends slowed against tougher comparisons and that three year sales stacks were essentially flat, suggesting the recovery is not yet broad based.
• Cautious views highlight that Q4 expectations have already moved higher, limiting the room for further positive surprises if macro or category specific demand softens.
• Others prefer to wait for clearer visibility on sustained growth in newer initiatives and AI driven device upgrade cycles before moving the stock more decisively onto Buy lists.

What's in the News

• Best Buy completed the latest tranche of its share repurchase program, buying back 467,873 shares for $34.64 million and finishing a multiyear authorization totaling nearly 24 million shares, or about 11% of shares outstanding (company buyback update).
• The company issued fourth quarter fiscal 2025 guidance calling for comparable sales growth in a narrow range of negative 1.0% to positive 1.0%, indicating expectations for a relatively stable demand environment (corporate guidance).
• Best Buy recorded $171 million in goodwill and intangible asset impairments in its unaudited third quarter 2025 results, reflecting portfolio and asset value adjustments amid the ongoing category recovery (impairment disclosure).
• Management raised fiscal 2026 guidance and now expects revenue of $41.65 billion to $41.95 billion and comparable sales growth of 0.5% to 1.2%, up from prior flat to slightly negative expectations (revised corporate guidance).
• Best Buy expanded strategic partnerships and in store experiences, including new IKEA shop in shop locations in Texas and Florida and broader rollouts of emerging tech brands such as VITURE XR glasses and Hohem smartphone gimbals, highlighting efforts to diversify traffic and product mix (client and product announcements).

Valuation Changes

• Fair Value Estimate edged down slightly from approximately $83.95 to about $83.90 per share, reflecting a modestly higher required return.
• Discount Rate has risen slightly from roughly 8.86% to about 9.13%, implying a marginally higher risk or return expectation embedded in the valuation model.
• Revenue Growth remains effectively unchanged at about 2.22%, indicating no material revision to top line expansion assumptions.
• Net Profit Margin is essentially flat at roughly 3.33%, suggesting stable expectations for underlying profitability.
• Future P/E declined modestly from about 14.6x to roughly 14.4x, pointing to a slightly lower valuation multiple applied to forward earnings.