What Happened?
Shares of electronics retailer Best Buy (NYSE: BBY) fell 4.4% in the afternoon session after the company’s better-than-expected second-quarter results were overshadowed by underlying weaknesses in the report and a cautious outlook.
The electronics retailer posted revenue of $9.44 billion and adjusted earnings of $1.28 per share, beating Wall Street's expectations. However, investors were disappointed that the company only reiterated its full-year guidance instead of raising it after the quarterly beat. The report also revealed a significant 9.7% miss on adjusted EBITDA. Furthermore, profitability concerns were highlighted by a gross margin that missed estimates and an operating margin that declined to 2.7% from 4.1% in the same quarter last year, indicating rising costs were pressuring the bottom line.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Best Buy? Access our full analysis report here, it’s free.
What Is The Market Telling Us
Best Buy’s shares are somewhat volatile and have had 10 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 6 days ago when the stock gained 4.2% on the news that the major indices rebounded, as Fed Chair Jerome Powell delivered dovish remarks at the much-awaited Jackson Hole symposium. Powell suggested that with inflation risks moderating and unemployment remaining low, the Federal Reserve might consider a shift in its monetary policy stance, including potential interest rate cuts. This outlook eased market concerns about prolonged high interest rates and their impact on economic growth. The prospect of lower borrowing costs bolstered investor confidence, particularly in sectors that have lagged, leading to a broad rally across the market.
Best Buy is down 15.7% since the beginning of the year, and at $72.68 per share, it is trading 29.6% below its 52-week high of $103.30 from September 2024. Investors who bought $1,000 worth of Best Buy’s shares 5 years ago would now be looking at an investment worth $653.42.
Here at StockStory, we certainly understand the potential of thematic investing. Diverse winners from Microsoft (MSFT) to Alphabet (GOOG), Coca-Cola (KO) to Monster Beverage (MNST) could all have been identified as promising growth stories with a megatrend driving the growth. So, in that spirit, we’ve identified a relatively under-the-radar profitable growth stock benefiting from the rise of AI, available to you FREE via this link.
