Best Buy Co., Inc. (BBY) reports on the second quarter of 2020 Merits Next week, analysts expect earnings of $ 1.07 per share on sales of $ 9.35 billion. The stock fell more than 4% after Best Buy beat estimates for Q1 2020 in May but rebounded quickly and is now trading at an all-time high. The company announced an optimistic sales update for the second quarter in July and was targeting a 2.5% year-over-year increase. Online sales were also found to have increased over 250% year over year by July 18, driven by strong demand for computers, devices and tablets.
The central theses
- Best Buy benefits from strong sales of computers, mobile devices and devices.
- The stock broke out in July and is trading at an all-time high.
- Oversized gains in August increase the likelihood of a sell-the-news reaction according to the August 25 earnings report.
The COVID-19 pandemic has turned lemons into soda for select retail groups. Socially distant customers use stimulus checks to quickly upgrade kitchens, bathrooms, appliances, PCs and mobile devices. Looking ahead, the release of next-generation game consoles in the fourth quarter should support demand in this once-lagging segment and contribute to Best Buy revenue well into 2021.
Wall Street has still not jumped on the bull train, with a “moderate buy” consensus based on eight “buy” and eight “hold” recommendations. That didn’t stop the retailer’s stock from gaining 57% in the second quarter and up 29% in the third quarter. Price targets Currently, they range from a low of $ 85 to a street high of $ 130 as the stock opened Friday’s session at $ 6 above the median of $ 106. This placement warns that new upgrades may be required to generate additional profits.
Best Buy long-term chart (1997 – 2020)
The stock rose from a five-year low in 1997 and hit a new high a year later. The rally peaked at $ 39.50 at the start of the new decade before the bear market retreated in single digits. It rebounded to its 2004 high, but didn’t break out until 2005, posting modest gains from the 2006 high of $ 59.50. That was the highest high for the next 11 years before falling to a six-year low in mid-teens in 2008.
A recovery wave in 2010 failed, creating a downtrend that undercut the previous 2013 low. This ended a seven-year downtrend that gave way to a two-legged recovery wave that finally reached the high of 2006 in the second quarter of 2017. It broke out immediately and posted an impressive uptrend on the August 2018 high at $ 84.37 Benchmarks by the end of the year. A December 2019 breakout failed in February 2020, dropping the stock to its 2018 lows.
Best Buy Short Term Chart (2018-2020)
The rebound in the second quarter followed the same trajectory as the previous decline, completing a 100% V-shaped recovery pattern in July. There was a gap in the next session that hit a new high adding 21 points to Friday’s opening bell. The second quarter sales update triggered the breakout and rally and increased the likelihood that the quarterly results would now be “burned” into the stock price. This, in turn, increases the likelihood of a response to the post-confessional sale of the news in the next week.
A Benchmark is a standard by which the performance of a security, mutual fund, or investment manager can be measured. Generally stocks and bonds with a broad market and market segment Indices are used for this purpose.
The bottom line
Best Buy shares rebounded quickly from the pandemic in the first quarter, reaching an all-time high in July. Since then, another 20 points have been added, resulting in an extreme departure overbought technical metrics that increase the chances of a sell-off or Trade range after the profit announcement on August 25th.
Disclosure: The author held no positions in any of the above securities at the time of publication.