Why Is Best Buy (BBY) Stock Soaring Today

What Happened:

Shares of electronics retailer Best Buy (NYSE:BBY) jumped 16.6% in the morning session after the company reported second-quarter earnings results. Revenue beat by a narrow margin, while EPS beat more convincingly. The company observed signs of demand stabilization and, as a result, raised EPS (non-GAAP) guidance for the full year ahead (ahead of expectations). Overall, this quarter had some key positives.

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What is the market telling us:

Best Buy’s shares are somewhat volatile and over the last year have had 2 moves greater than 5%. But moves this big are very rare even for Best Buy and that is indicating to us that this news had a significant impact on the market’s perception of the business. 

The biggest move we wrote about over the last year was 3 months ago, when the stock gained 12% on the news that the company reported first quarter results that beat analysts' gross margin and EPS expectations. 

On the other hand, its revenue missed as its same-store sales fell by more than projected (a 6% drop vs an estimated 5% drop). However, guidance was more encouraging, with the CFO admitting that the business is already trending towards the midpoint of the annual comparable sales guidance. 

In addition, the profitability update was even more impressive, with the company adding, "We expect to deliver profitability at the high end of our non-GAAP operating income rate guidance due to a higher gross profit rate in our membership and services offerings." Zooming out, we think this was still a decent, albeit mixed, quarter, showing that the company is staying on track.

Best Buy is up 30.4% since the beginning of the year, and at $100.98 per share, has set a new 52-week high. Investors who bought $1,000 worth of Best Buy’s shares 5 years ago would now be looking at an investment worth $1,590.

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