Best Buy ‘s quarter came up short of expectations, with the misses compounded by downward revisions to management’s outlook for the remainder of the year. We were not surprised by Tuesday morning’s print and have a plan. Revenue in the company’s fiscal 2025 third quarter fell 3.2% year over year to $9.45 billion, missing the $9.76 billion expected by analysts, according to estimates compiled by LSEG. Adjusted earnings per share in the three months ended Nov. 2 dropped 2.3% to $1.26, also coming up short. LSEG estimates called for EPS of $1.29. BBY YTD mountain Best Buy YTD These were not the results we wanted from Best Buy, but they are the numbers we had expected. That’s why we recently took measures to protect hard-fought gains in the position. We trimmed shares in late October and last week in the high and mid-$80s. Jim Cramer said it’s too soon to buy back those shares on Tuesday’s roughly 6% post-earnings stock decline. Bottom line While management indicated that November is off to a good start, high mortgage rates and uncertainty regarding increased tariffs under President-elect Donald Trump ‘s administration pose headwinds that cannot be ignored. Lots of electronics are made overseas. As we wait for clarity, we’re trimming our price target to $100 per share from $110 but maintaining our 2 rating. Jim said Tuesday he would consider adding shares if they were to drop into the $70s. Best Buy stock below $80 would push the dividend yield up to just under 5% — a nice payout for our patience. We still believe in the stock because Best Buy should benefit once mortgages drop and housing turnover picks up. The high cost of buying a home has been a headwind for big-ticket items like appliances and home theater setups. The boost we expect from artificial intelligence PC sales and iPhone upgrades is also taking longer than anticipated. Best Buy Why we own : We believe Best Buy will prove to be a go-to destination for consumers looking to upgrade hardware, much of which was purchased during Covid, to new AI-powered devices. We also see Best Buy as a beneficiary of an expected uptick in housing formation. When people buy homes, they need to fill them up with big-ticket items like appliances and home theaters. Competition : Target , Walmart , Amazon , Costco Most recent buy : July 2, 2024 Initiated : March 27, 2024 Commentary Best Buy CEO Corie Barry attributed the quarterly sales weakness to a combination of macroeconomic uncertainty, purchase delays in anticipation of the holiday season – why buy a TV in October when all the sales start in November, around Black Friday – and, what she called the “distraction during the run-up to the election.” That said, Barry did add that demand has picked up in Best Buy’s fiscal 2025 fourth quarter now that the presidential election is behind us and holiday sales are ramping up. “Enterprise comparable sales for the first three weeks of November are up approximately 5% over last year,” she said on the…
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