Telsey Advisory Group analyst Joseph Feldman reiterated the Outperform rating on Best Buy Co., Inc. (NYSE:BBY), lowering the price forecast from $100 to $90.
The company will report first-quarter earnings on Thursday, May 29.
Feldman maintains first-quarter estimates for Best Buy but trims full-year 2025 projections due to mounting headwinds from a murky macro backdrop and renewed tariff concerns.
The analyst forecasts a 1% year-over-year decline in Best Buy's revenue to $8.8 billion for the quarter, in line with expectations, and projects a consolidated comparable sales decline of 0.5%, compared to flat-to-slightly-down guidance.
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He noted that roughly 60% of Best Buy's cost of goods sold comes from China, with Mexico accounting for another 20%, leaving the company highly vulnerable to trade-related cost inflation.
Although key categories like smartphones, laptops, computers, and TVs--making up about 70% of sales--are currently exempt from the 30% China tariff, other segments such as gaming consoles, appliances, audio, and drones may see cost pressures.
Feldman anticipates these tariffs will erode profitability, as Best Buy may need to either absorb higher costs or raise prices if suppliers don't shoulder the burden. These effects will likely intensify as the year progresses and impact inventory flows.
On the margin front, Feldman anticipates operating margin will contract by about 40 basis points to 3.4% in the quarter to be reported, aligning with company guidance. He projects a modest 10-basis-point improvement in gross margin to 23.4%, supported by gains from the revamped membership program and a growing mix of higher-margin services.
Feldman credits Best Buy's operational discipline and category leadership for helping it weather current challenges.
Additionally, he sees sales upside from cycling three years of negative comps, new product cycles, and aging purchases from the 2019–2020 boom.
Ongoing AI innovation and expanding higher-margin offerings like loyalty and health services could further support growth.
Feldman revised the 2025 EPS forecast to $6.30--down from $6.44--acknowledging a more cautious stance amid current market dynamics.
Price Action: BBY shares are trading lower by 1% to $70.05 at last check Friday.
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