Why Best Buy Stock Jumped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Best Buy (NYSE: BBY  ) were soaring again today, climbing as much as 17% on a strong second-quarter earnings report.

So what: The big-box electronics retailer now seems to be in the full throes of a turnaround, its stock price having tripled in the past year. Earnings improved this time around due to cost-cutting and online sales initiatives, coming in after adjustments at $0.32 per share, well ahead of estimates at $0.12 and up from just $0.04 a year ago. Online sales jumped 10.5% in the period, but comparable in-store sales fell 0.6%, and revenue edged down 0.4% to $9.3 billion. That sum was still better than analyst expectations at $9.13 billion.

Now what: This was certainly a promising report for Best Buy, but with shares already having appreciated so much this year, the price may be reaching a ceiling. Best Buy is now valued at a P/E of 15 based on this year's earnings, less than Wal-Mart's at 14, which is generally considered a much stronger retailer. Best Buy appears to be on its way to full health, but I wouldn't expect serious growth until same-store sales are moving in the right direction.

Best Buy's resurgence may show that brick-and-mortar retailers are not done yet. Read about the 3 More Companies Ready to Rule Retail in The Motley Fool's special report. Uncovering these top picks is free today; just click here to read more.

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9/27/2016 4:00 PM
BBY $38.25 Up +0.74 +1.97%
Best Buy CAPS Rating: *