Is There Now an Opportunity in Best Buy After Shares Jumped 9.3% This Month?

Trying to decide what to do with Best Buy’s stock? You are not alone. Investors have been puzzling over the company’s direction, especially after a stretch of volatility and shifting sentiment. From jumps in digital sales campaigns to buzz about evolving consumer habits, there is plenty to unpack when looking at Best Buy today.

Over the past week, Best Buy shares rose 4.5%, which helped recoup some of this year’s losses. In fact, the stock climbed 9.3% in just the last 30 days. Longer-term numbers paint a more nuanced picture: Best Buy is up 40.3% over three years but down 5.6% in the past year and 8.3% over five years. These statistics hint at both risk and opportunity depending on your time horizon, and they mirror how investors have responded to upgrades in product offerings and strategic partnerships, as well as a shift in how people are spending on tech and home essentials.

So, is Best Buy undervalued right now? Using a quick value check across six different metrics, the company stands at a valuation score of 3, which means it passes half of the main undervaluation checks. But numbers are only part of the story. In the next section, we will break down exactly which valuation approaches we are using before exploring a method that could give you the most complete picture yet.

Why Best Buy is lagging behind its peers

Approach 1: Best Buy Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company’s intrinsic value by projecting its future cash flows and discounting them back to today’s dollars. This approach attempts to determine how much all of Best Buy’s expected future cash flows are worth at present, based on current information and reasonable assumptions about the future.

Best Buy’s most recent Free Cash Flow (FCF) stands at $1.31 Billion. Analyst estimates project continued growth, with cash flows forecast to reach approximately $2.20 Billion by 2030. For the first five years, these projections are based on analyst consensus. After this period, Simply Wall St extrapolates future growth. This steady increase considers how the company adapts its business model and capitalizes on trends in the electronics and specialty retail sector.

According to this 2 Stage Free Cash Flow to Equity model, Best Buy’s estimated intrinsic value is $177.71 per share. Given the current price, this implies a 53.1% discount, suggesting the stock is undervalued based on projected cash flows.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Best Buy.

Our Discounted Cash Flow (DCF) analysis suggests Best Buy is undervalued by 53.1%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Best Buy Price vs Earnings

For established, profitable companies like Best Buy, the Price-to-Earnings (PE) ratio is a preferred metric because it directly relates the price investors pay for a share to the company's underlying earnings. This measure can help investors assess whether the stock price reasonably reflects its profit-generating power, especially when consistent earnings make for reliable comparisons.

What counts as a “normal” or “fair” PE ratio depends on several factors. Companies with higher growth prospects tend to warrant higher PE ratios, as investors are willing to pay more for future earnings growth. Conversely, higher risk or slower growth typically results in a lower fair multiple.

Best Buy currently trades at a PE ratio of 22.48x. That is just below the peer group average of 23.89x and well above the broader specialty retail industry average of 16.91x. While these comparisons offer some context, they do not account for company-specific dynamics.

This is where Simply Wall St’s proprietary “Fair Ratio” comes in. The Fair Ratio provides a more nuanced benchmark by considering Best Buy’s earnings growth, industry, profit margin, risk profile and size. For Best Buy, the Fair Ratio stands at 21.93x, just a fraction below its current PE ratio. This tailored approach gives a clearer picture than standard industry or peer checks by factoring in relevant growth and financial metrics unique to Best Buy.

Because the company's actual PE of 22.48x is nearly identical to its Fair Ratio of 21.93x, the stock appears to be priced about right based on earnings potential today.

Result: ABOUT RIGHT

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Best Buy Narrative

Earlier, we mentioned there is an even better way to understand valuation. Now, let’s introduce you to Narratives. A Narrative is your personal story behind the numbers, allowing you to tie together your own view of Best Buy’s future, from revenue growth and profit margins to risk factors, and see how these assumptions change the company’s fair value.

This approach connects a company’s bigger picture, including its business model, market trends, and challenges, to your own financial forecasts. This makes it easy to check if the current share price matches your outlook. Narratives are accessible right on Simply Wall St’s Community page, used by millions of investors to share perspectives and instantly compare Fair Value to Market Price. As news breaks or earnings are announced, these Narratives update dynamically so your forecasts remain fresh and relevant.

For example, you will find that some investors believe Best Buy’s fair value could be as high as $95, expecting momentum from e-commerce and supply chain improvements, while others estimate it closer to $60, citing increased competition and margin pressures. By building a Narrative, you can quickly see which story and valuation best matches your own investment view. This empowers you to decide whether to buy, hold, or sell with confidence.

For Best Buy, here are previews of two leading Best Buy Narratives:

• 🐂 Best Buy Bull Case

  Fair Value Estimate: $84.19

  Implied Undervaluation: -1.11%

  Assumed Revenue Growth Rate: 2%

  • Best Buy relies on thin margins and high sales volumes, offering widely available products and additional services such as memberships and credit cards to boost loyalty.
  • An omnichannel strategy that includes digital expansion, store optimization, and a focus on "Click and Collect" supports margins. However, store closures could affect brand perception.
  • The company lacks a strong competitive moat. While there has been moderate improvement in recent years, long-term outperformance or high income is unlikely given intense market competition.
• 🐻 Best Buy Bear Case

  Fair Value Estimate: $80.71

  Implied Overvaluation: 3.16%

  Assumed Revenue Growth Rate: 2.04%

  • Future results depend on upgrade cycles, AI hardware adoption, and retail media. Margin and earnings stability face pressure from cost inflation and growing online competition.
  • Expansion into digital marketplaces and supply chain investments support profitability and efficiency, but earnings growth may be limited by changes in sales mix and ongoing risks to the retail model.
  • Analyst consensus suggests only modest upside from current prices, with the view that Best Buy is roughly fairly valued unless growth or margins significantly exceed expectations.

Do you think there's more to the story for Best Buy? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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