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Investing.com - Evercore ISI raised its price target on Best Buy Co. (NYSE:BBY) to $77.00 from $75.00 on Friday, while maintaining an "In Line" rating on the electronics retailer. Currently trading at $72.66, InvestingPro analysis suggests the stock is undervalued, with a 5.23% dividend yield that ranks among the highest in specialty retail.
The firm noted that Best Buy’s 2Q comparable sales growth of 1.6% marked its best performance since the third quarter of 2021, potentially signaling a path to earnings growth in 2026. Sales momentum that began in June and July has continued into August, with management guiding third-quarter sales 150 basis points above consensus estimates. The $41.6 billion revenue retailer maintains strong financial health, with InvestingPro data showing sufficient cash flows to cover interest payments and moderate debt levels.
Despite the stronger top-line performance, Best Buy maintained its full-year earnings guidance of $6.15 to $6.30 per share with comparable sales between negative 1% and positive 1%, indicating limited flow-through to the bottom line. Evercore expects increased promotional activity heading into the holiday season to weigh on gross margins, though the company’s current P/E ratio of 17.54 suggests reasonable valuation metrics.
The firm highlighted several potential sales drivers, including the Nintendo Switch 2 release, Windows 10 phase-out, and mobile phone initiatives. New profit streams from marketplace offerings, services, and advertising could partially offset margin pressure.
Evercore projects that Best Buy’s earnings per share will bottom above $6 in calendar 2025 before returning to growth in 2026, reaching approximately $6.40 per share.
In other recent news, Best Buy has reported its second-quarter earnings for fiscal year 2026, revealing a stronger-than-expected performance. The company posted earnings per share of $1.28, surpassing the forecast of $1.22. Revenue also exceeded expectations, reaching $9.4 billion compared to the anticipated $9.23 billion. Despite these positive results, Best Buy slightly missed on its gross margin. The company has reiterated its fiscal year 2026 guidance and indicated it is trending toward the high end of its sales guidance range of -1% to 1%. In light of these developments, Goldman Sachs has raised its price target for Best Buy to $95 from $94, maintaining a Buy rating. These updates reflect recent developments surrounding Best Buy’s financial performance and market outlook.
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