BBY Stock Soars 19% After Earnings, But Is It A Best Buy?

This morning, Best Buy (NYSE:BBY) posted results from its second quarter of fiscal 2017, and investors are rejoicing over beats achieved on the earnings and sales front. The company posted adjusted EPS of $0.57, topping our quarterly consensus estimate of $0.42 by 35.7%. Best Buy topped our sales estimate of $8.401 billion as well, recording revenues of $8.533 billion over the quarter.

It should be noted that quarterly revenues almost mirror the $8.528 billion in sales generated in Q2 of fiscal 2016. Analysts expected sales to decrease over comparable quarters, but BBY did well in maintaining its revenue levels over the quarter. In spite of sales being similar to the same quarter from the prior year, net earnings climbed by 20.7%. However, this large increase is possible because of a lower effective tax rate and $16 million of earnings from discontinued operations.

Investors have sent BBY shares over 19% higher today, and they are probably betting on the stock because of its 23.7% growth in comparable online sales and its ability to grow comparable sales when most people expected to see comps decline. The sales beat could lead some to believe that Best Buy can hold onto its market share and even find some growth from its online store.

As analysts digest this new information, they may revise their estimates higher for the next quarter. This has a strong chance of leading to an even higher stock price for BBY over the near term. Shares have already shot up by a strong margin, but there may be room to climb higher since the stock trades at a forward PE of just 11.45. The electronics retailer also has a low PEG of 1.16.

While there is reason to feel optimistic on Best Buy in the short term, one should be wary of investing in the stock over the long run. Other large retailers such as Wal-Mart (NYSE:WMT) and Amazon (NASDAQ:AMZN) could take away more of the corporation’s market share in the years to come since they are able to offer electronic products at cheaper prices. Right now, Best Buy is a Zacks Rank #3 (Hold), but the rank could change following the release of its latest earnings report.

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