Shares of consumer electronics giant Best Buy (BBY -2.51%) tumbled 12.5% last week, as investors weren't satisfied with the company's Q1 earnings beat. Comp sales growth soared past analysts' estimates, but investors instead seemed to zero in on a slowdown in Best Buy's online sales growth.

However, there's no reason for investors to worry about weakening online sales trends when in-store sales momentum is growing. (In-store sales are almost certainly more profitable, due to the cost of shipping for online orders.) Improving fundamentals and the recent pullback in the share price together make Best Buy stock an intriguing investment opportunity.

Best Buy had a fantastic first quarter

Best Buy achieved a stellar 9% increase in comparable store sales in last year's fourth quarter. This was the company's best sales result in more than a decade. However, in conjunction with the Q4 earnings report, management projected that comp sales growth would slow significantly this year.

For the first quarter, the company forecast that comp sales would rise 1.5% to 2.5% and adjusted earnings per share would reach $0.68 to $0.73. (EPS came in at $0.60 in the year-earlier period.) For the full year, Best Buy estimated that comp sales would increase 0% to 2%, causing adjusted EPS to rise to a range of $4.80 to $5.00, up from $4.42 last year.

The exterior of a Best Buy store

Best Buy's official guidance calls for EPS growth to slow this year. Image source: Best Buy.

Best Buy blew past management's sales and earnings forecast last quarter. Comp sales surged 7.1% year over year, both on a companywide basis and in the domestic market. Analysts had expected a comparatively modest 2.9% increase. Adjusted EPS surged 37% to $0.82, easily beating the average analyst estimate of $0.74.

Domestic online sales rose "only" 12% last quarter, whereas Best Buy's online sales have grown at an annualized clip of more than 20% in recent years. Nevertheless, Best Buy believes it is still gaining share online. In any case, investors should be glad that the company is seeing a rebound in store traffic, since that sales channel remains the primary revenue and earnings driver.

Momentum remains strong

The bulk of Best Buy's Q1 sales growth came in the "computing and mobile phones" category, which accounts for nearly half of the company's revenue. Comp sales in computing and mobile phones rose 10.2% in the U.S. last quarter. Clearly, Best Buy is benefiting from its position as the last national chain focused on consumer electronics.

Appliances have also been a key growth category for Best Buy. The company has been gaining market share rapidly in this area, mainly at Sears Holdings' (SHLDQ) expense. Indeed, Best Buy probably overtook Sears for the No. 3 spot in the U.S. appliance market in 2017.

Last quarter, Best Buy's appliance segment comp sales rose 13% in the U.S. Outside the U.S., where Best Buy is benefiting from the liquidation of Sears Canada, appliance comp sales surged 37.7%. With Sears Holdings continuing to close stores at a rapid pace -- and likely to go out of business entirely within the next couple of years -- there is plenty of room for further growth in appliances. (Best Buy is also well positioned to capture consumer electronics sales from Sears.)

Guidance is almost certainly conservative

Aside from the slowdown in online sales growth, a second reason why Best Buy stock may have fallen last week was that management kept its full-year guidance intact. This implies that Best Buy expects comp sales to decline in the second half of the fiscal year. It also implies a sharp slowdown in EPS growth, despite the substantial positive impact of tax reform.

While Best Buy will face increasingly tough comparisons as the year progresses, it should be able to continue growing comp sales. It is set to benefit from strong consumer spending, further Sears store closures, and even the closure of its Best Buy Mobile stores (which will direct more traffic to its big-box locations -- and website).

Indeed, it's noteworthy that nine of Best Buy's last 10 earnings releases have announced "better-than-expected" earnings. That's a clear sign that management has adopted a strategy of issuing ultra-conservative forecasts that it can beat time after time.

Best Buy stock is starting to look attractive again

While Best Buy stock has risen significantly since bottoming out last September, the stock price is now near its lowest levels for 2018. That's surprising, given that Best Buy sailed past expectations for both revenue and earnings last quarter.

BBY Chart

Best Buy stock performance. Data by YCharts.

To some extent, last week's pullback may indicate that expectations were too high prior to Best Buy's earnings report. That said, Best Buy stock now trades for just 14 times the company's full-year EPS guidance -- and that guidance is probably way too low.

Its substantial stock buyback program will allow the company to benefit from the recent drop in its share price. And if Best Buy continues to surpass its own forecasts and capitalize on the demise of weaker competitors, the stock should bounce back before too long.