Best Buy Stock is an Early Holiday Shopping Trade

Consumer electronics retailer Best Buy NYSE: BBY stock has been selling off since peaking off the recent highs near $124.89 as fears of supply chain and logistics disruptions may impact holiday sales. Best Buy has emerged from the pandemic into the reopening trend a more efficient organization. The Company has seen online sales grow to 32% of domestic revenues. While the Company claims to have the logistics and supply chain issues worked out for the holiday shopping season, investors are clearly nervous. The acceleration of COVID vaccinations has not slowed down the new normal as the percentage of online sales picked up at a local store rose to 42% in the recent quarter. Prudent investors seeking exposure in the leading standalone consumer electronics player in the U.S. can watch for opportunistic pullbacks in shares of Best Buy.

Q2 FY Fiscal 2022 Earnings Release

On Aug. 29, 2021, Best Buy released its fiscal second-quarter 2021 results for the quarter ending July 2021. The Company reported earnings-per-share (EPS) of $2.98 excluding non-recurring items versus consensus analyst estimates for a profit of $1.89, a $1.09 blowout beat. Revenues grew 19.6% year-over-year (YoY) to $11.85 billion, beating consensus analyst estimates for $11.54 billion. Enterprise comparable same-store sales (SSS) rose 20% YoY.  

Raised Fiscal 2022 Guidance

Best Buy raised its estimates for fiscal Q3 2022 for revenues to come in between $11.4 billion to $11.6 billion crushing analyst estimates for $10.49 billion. The Company sees fiscal full-year 2022 revenues in the range of $51 billion to $52 billion versus $9.34 billion consensus estimates with Enterprise SSS growth between 9& to 11% versus 3% to 6% prior outlook.

Conference Call Takeaways

CEO Corie Barry set the tone, “today, we are reporting record Q2 financial results of $11.8 billion in sales and non-GAAP diluted earnings per share of $2.98. Comparable sales growth was 20% and our non-GAAP operating income growth was 40%. We are lapping an unusual quarter last year, as our stores were limited to curbside service or in-store appointments for roughly half the quarter. When we compare to two years ago, our results are very strong. Compared to the second quarter of Fiscal '20 revenue is up 24% and our non - GAAP operating income is up 115%. Clearly, customer demand for technology products and services during the quarter remains very strong. Customers continue to leverage technology to meet their needs. And we provided solutions that help them work, learn, entertain, cook, and connect at home. The demand was also bolstered by an overall strong consumer spending aided by government stimulus, improving wages, and high savings levels.”

Supply Chain

CEO Barry touched on the supply chain concerns, “From a merchandising perspective, we saw a strong comparable sales growth in almost all categories. The biggest contributors to the sales growth in the quarter were home theater, appliances, computing, mobile phones, and services. Product availability improved in the quarter, and except for some pockets in appliances and home theater, we do not believe it materially limited our overall sales growth. Our merchant, demand planning, and supply chain teams once again did an amazing job managing through the difficult and constantly evolving supply-chain environment. They worked strategically to bring in as much inventory as possible during the quarter, with actions like acquiring additional transportation, pulling up product flow, and adjusting store assortment based on availability. There will continue to be challenges, particularly as it relates to congested ports and transportation disruptions, but our teams have set us up for as strong an inventory position as possible as we move forward into the back half of the year. As we think about the holiday period, we often have varying degrees of inventory and supply chain challenges, and this year will be no different. But we feel confident in our ability to serve our customers during the holiday. But continued strong demand across retail resulted in an overall less promotional environment, which was a significant driver of our better-than-expected profitability in the quarter.”

BBY Opportunistic Pullback Price Levels

Using the rifle charts on the weekly and daily time frames provides a precision view of the landscape for BBY stock. The weekly rifle chart is in a downtrend with the falling 5-period moving average (MA) at $107.65 with the falling 15-period MA near the $111.00 Fibonacci (fib) level. The weekly stochastic has a bearish mini inverse pup that is falling under the 20-band with daily lower Bollinger Bands at $102.79. The weekly market structure low (MSL) buy triggers a breakout through the $110.38 level. The daily rifle chart downtrend formed a market structure high (MSH) sell trigger when shares fell under $120.01. The daily rifle chart attempted an inverse pup breakdown but managed to hold the $105.54 fib level as the daily stochastic coiled back up again. The daily 5-period MA is slowly rising near the $106.33 fib as it attempts a reversal. Prudent investors can watch for opportunistic pullbacks at the $105.54 fib, $103.45 fib, $101.74 fib, $99.79 fib, $97.74 fib, $95.17 fib, and the $93.38 fib level. Upside trajectories range from the $113.24 fib upwards to the $130.28 fib level.