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Shoppers Look For Deals On Black Friday As Supply Crunch Continues

Octavio Jones/Getty Images News

A bull case for Best Buy (NYSE:BBY) is not widely endorsed by analysts despite the electronics retailer’s big Q3 earnings beat.

Shares of the Minnesota-based ripped over 11% higher into afternoon trading on Tuesday after posting beats on the top and bottom line for the third quarter. Additionally, right-sizing of inventory levels leaves management optimistic on holiday sales as consumers seek to step back into brick and mortar stores as they cross items off their wish lists.

“We expect shopping patterns will look more similar to historical holiday periods than what we have seen in the last 2 years,” CEO Corie Barry said. “Specifically, we expect there will be more customer shopping activity concentrated on Black Friday week, Cyber Monday, and the two weeks leading up to December 25.”

However, analysts remained somewhat skeptical about longer term trends.

“Despite the sales pressure, the company managed its expenses nicely driving a 30%+ beat on the EBIT line. Plus, it raised guidance by flowing through its better-than-expected 3Q performance,” UBS analyst Michael Lasser acknowledged. “Still, the outlook remains highly uncertain for the upcoming periods. This is likely to weigh on BBY’s multiple.”

As such, he maintained a Hold rating on the stock and a $76 price target, below the trading range on Tuesday.

Similarly, Truist analyst Scot Ciccarelli maintained a Hold rating and a $69 price target as consumer trends remain uncertain even if markdown risk is moderated into holiday sales. Still, he indicated the “worst of the sales declines” may be in the past after the upside surprise for Q3 earnings.

The consensus rating among analysts remains a Hold, having shifted to that consensus rating in late July. SeekingAlpha’s Quant team has held a Hold rating since early December 2020.

Read the earnings call transcript.

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