Best Buy up 20% after Q1 results last week: should you buy?
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May 30, 2022
Gina Sanchez explains why the stock is still not a “buy” on a CNBC interview.
Shares of consumer electronics retailer have recovered 20% in recent days.
Shares of Best Buy Co Inc (NYSE: BBY) continue to be unattractive for the CEO of Chantico Global, even after the Richfield-based company reported better-than-expected revenue for its fiscal Q1 last week.
Best Buy is not a good pick for times of inflation
Gina Sanchez warns the consumer electronics retailer will have to eventually succumb to inflation that still stands near a forty-year high of 8.30%. Speaking with CNBC’s Kelly Evans, she said:
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People will buy makeup, cheaper clothing, and beauty products. But we don’t think they’ll make large-scale purchases of electronic items if inflation hangs out. That’s something that’ll continue to remain under pressure.
In its earnings report, the NYSE-listed firm itself confirmed the demand had started to soften as it lowered its guidance for the full year. The stock trades at a PE multiple of 9.21.
Why is Best Buy stock up 20% after Q1 report?
Interestingly, however, the earnings report resulted in a 20% gain for BBY in the subsequent days. Commenting on the price action on CNBC’s “The Exchange”, Sanchez added:
Best Buy definitely had a bounce but they also got pummelled. So, I think some of that bounce really comes from just a relief out of that. But if you assume that inflation is here for a while, the large-scale purchase is not on the agenda.
The stock is still down more than 35% from its recent high. Wall Street, at present, rates Best Buy Co Inc at “overweight” and sees another 10% upside from here, on average.
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