JPMorgan cuts Best Buy price target to $95, keeps overweight rating

On Thursday, JPMorgan analyst Christopher Horvers adjusted the price target for Best Buy shares (NYSE:BBY) to $95 from the previous target of $110, while maintaining an Overweight rating on the stock. Currently trading at $65.46, Best Buy appears undervalued according to InvestingPro analysis. The revision follows Best Buy’s recent earnings report, which revealed mixed financial results, including a comparable sales miss of -0.7% against an anticipated -0.4% and an EPS beat attributed to a tax settlement. The company, with its substantial $41.53 billion in revenue, remains a prominent player in the specialty retail industry.

Best Buy’s guidance for the second quarter was also reduced by approximately 11%, with the full-year forecast adjusted to the lower end of the previous range. This outlook accounts for the continuation of existing tariffs. The company experienced lower comparable sales due to product elasticity and sustained pressure in certain categories, such as appliances. Additionally, a slight decline in gross margin was reported, contrasting with prior expectations of a flat to slight increase. This was partly due to a more computing-driven mix and an estimated 10-20 basis points impact from the necessity to invest in pricing strategies to stimulate sales amid higher tariff-induced prices. Despite these challenges, InvestingPro data shows that Best Buy maintains strong financial health with sufficient cash flows to cover interest payments and operates with a moderate level of debt. Get access to 8 more exclusive InvestingPro Tips and comprehensive analysis in the Pro Research Report.

The report noted that the current quarter-to-date trends appear slower than the flat results seen in the last two months of the first quarter. This is in line with market feedback suggesting a pull-forward effect that will predominantly impact the second quarter. However, with the upcoming launch of the Nintendo Switch in June, JPMorgan forecasts over a point of sequential comp benefit, referencing the previous gaming cycle where entertainment sales surged following a new product release.

Despite the slower start to the quarter, JPMorgan finds the current valuation of Best Buy stock appealing. Current market data from InvestingPro shows a P/E ratio of 15.31x and an EV/EBITDA multiple of 6.25x, while offering an attractive dividend yield of 5.31%. The firm anticipates that the tariff situation is now less risky and expects better trends in June with the new gaming console release and a robust computing cycle anticipated for the back-to-school season. Notably, Best Buy has maintained dividend payments for 23 consecutive years, demonstrating strong commitment to shareholder returns.

The analyst believes that while sales momentum is necessary, there are significant drivers within the computing, gaming, mobile phones, and television categories that could stimulate growth. The December 2025 price target of $95 is based on a PE multiple of 13.6x on JPMorgan’s above-consensus 2026 estimates, which corresponds to 7x EV/EBITDA, aligning with historical averages.

In other recent news, Best Buy reported its first-quarter earnings for 2025, surpassing analyst expectations with an earnings per share (EPS) of $1.15, compared to the forecasted $1.07. The company’s revenue reached $8.8 billion, slightly above the $8.75 billion forecast. Despite these positive results, Best Buy’s stock experienced a decline in premarket trading, reflecting investor concerns over broader market trends and future guidance. Truist Securities adjusted its price target for Best Buy, increasing it from $64.00 to $69.00, while maintaining a Hold rating on the shares. Analysts noted that positive sales in computing and tablets were offset by weaker performance in more expensive and discretionary categories.

Best Buy’s efforts to mitigate tariffs through sourcing diversification and vendor negotiations have been more successful than anticipated. However, the company’s sales momentum remains subdued, and this could be the third consecutive year of nearly unchanged earnings. Best Buy’s domestic comparable sales declined by 0.7%, despite growth in computing and mobile phone sales. The company’s gross profit rate improved slightly, and it continues to offer a dividend yield of approximately 5%.

Best Buy has provided a full-year comparable sales guidance, projecting a range from a 1% decline to a 1% increase. The company anticipates growth in computing, mobile, and gaming categories and is focusing on strategic initiatives in digital experiences and marketplace expansions. Analysts from Truist Securities highlighted that the lack of evident sustainable upward earnings momentum is likely to keep Best Buy’s shares in a state of uncertainty for the foreseeable future.

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