Why Best Buy Stock Popped 5% This Morning

Investors bet the U.S.-China trade war truce is a win for Best Buy.

Rich Smith
Rich Smith
Jul 1, 2019 at 2:08PM
Consumer Goods

What happened

Best Buy (NYSE:BBY) stock was rocking this morning, up more than 5% on news that over the weekend, President Trump postponed implementation of new 25% tariffs on some $300 billion worth of Chinese imports to the U.S.

The stock hasn't been able to hold onto all those gains -- as of 1:50 p.m. EDT, Best Buy shares are up "only" 4.2%. Still, the reason the stock is doing well survives intact.

Two fists emblazoned with U.S. and Chinese flags meet.

Image source: Getty Images.

So what

In May, Best Buy suffered a one-day, 5% sell-off in response to news that President Trump would implement tariffs on some $300 billion worth of Chinese goods. Not long after, Best Buy CEO Hubert Joly was quoted warning that "tariffs at 25 percent will result in price increases and will be felt by U.S. consumers," potentially depressing sales at Best Buy by these consumers.


Related Articles

Now what

Absent those 25% tariffs, however, it's logical to presume that prices will not rise, that consumers will not feel a pinch, and Best Buy's sales estimates will remain intact -- or even improve.

After all, in reiterating guidance in May for full-year sales between $42.9 billion and $43.9 billion and adjusted earnings per share of $5.45 to $5.65, the company said it was balancing "better-than-expected Q1 earnings" against "our best estimate of the impact associated with the recent increase in tariffs on goods imported from China."

Take away the tariffs, and all you've got left is a great Q1 -- potentially giving rise to an even better full year for Best Buy.