Best Buy (BBY) Stock Review: The Holiday Turnaround We’ve Been Waiting For?

Best Buy Stock Review: The Holiday Turnaround We’ve Been Waiting For?

Welcome back, everyone! I hope you all had a fantastic Thanksgiving filled with family, football, and perhaps just a little too much turkey. If you’re anything like me, you’re probably still trying to figure out if that extra slice of pumpkin pie was a growth investment or just a way to be a glutton for a day. But speaking of digesting heavy things, let’s shake off the food coma and dive into something a little more relevant for your portfolio this Cyber Monday: Best Buy(BBY).

As we scroll through endless deals today(I just bought a humidifier since it’s dry as heck over here but it was an Amazon purchase), it’s the perfect time to look at the retailer that powers so much of our holiday shopping. Best Buy just dropped their Fiscal 2026 Q3 earnings last week, and frankly, there’s a lot to unpack. The company seems to be turning a corner after a few years of post-pandemic indigestion, finally posting numbers that hint at a small recovery. But is the stock a buy as we head into the new year, or should you leave this one on the shelf?

The Business: A Return to Growth

For the first time in a long time, we can say Best Buy is back in growth mode albeit pretty miniscule growth. The headline numbers for the third quarter were decent. Enterprise revenue hit $9.7 billion, an increase of 2.4% versus last year. But the real star of the show was the comparable sales (comps) figure.

For those new to retail investing, comps are the important figure in retail—they measure sales at stores open for at least a year. Best Buy delivered enterprise comparable sales growth of 2.7%. To put that in perspective, this time last year, they were looking at a decline of 2.9%. Flipping from negative to positive territory is a massive psychological win for investors and proof that the business has stabilized and is perhaps moving forward.

The growth isn’t substantial as you’re essentially falling in line with inflation if not trailing it a bit but that’s certainly better than 3 consecutive fiscal years of revenues falling.

What’s Going Well? The growth isn’t accidental; it’s being driven by innovation and replacement cycles.

• Computing is King: The company delivered its seventh consecutive quarter of positive comps in computing. Why? Upgrades are being forced by things like Microsoft ending support for Windows 10 and laptops originally bought for zoom calls starting to die. Plus, the new AI-enabled PCs (Copilot+ laptops) are giving people a reason to spend.
• Gaming & Mobile: Gaming remains hot, fueled by hardware like the Nintendo Switch 2 (yes, it’s finally aiding the top line!) and handheld gaming PCs. Mobile phones also saw strong growth thanks to better carrier partnerships in-store. This can be a cyclical figure as there won’t be a new Nintendo Switch next year but it’s certainly a good bump this year and going into the holiday quarter.
• Online Strength: Domestic online revenue rose 3.5% on a comparable basis. This is critical as Best Buy fights off Amazon; they aren’t just holding ground, they are growing digital sales. However, 3.5% growth off a relatively small number is a bit disappointing and hopefully starts to tick up faster.

Profitability Check: On the bottom line, Best Buy delivered adjusted earnings per share (EPS) of $1.40, up 11% year-over-year. They managed this by keeping a tight leash on Selling, General, and Administrative (SG&A) expenses, which came in lower than expected despite higher sales. That’s the kind of operational discipline Wall Street loves. GAAP EPS was lower due to an impairment charge related to Best Buy Health.

Overall the earnings met expectations but they certainly didn’t blow anyone out of the water. It’s good to see growth but it’s still relatively anemic and shows there’s still a variety of issues facing Best Buy.

The Health of the Consumer: Picky but Present

One of the biggest questions facing any retailer in 2025 is: “Is the consumer broke?” According to Best Buy CEO Corie Barry, the answer is “No, but they are picky”. Which might actually mean they’re broke but who am I to question quoted words.

The consumer remains resilient but deal-focused. We aren’t seeing the wild spending sprees of 2021, but shoppers are willing to open their wallets for innovation. When there is a new tech product that solves a problem—like the latest AI glasses or a high-performance gaming rig—the money is there. I’ve seen that same verbiage used in a variety of retail earnings calls which means to me that the consumer isn’t showing a ton of strength and that’s the nice way of phrasing it. After all, a retail CEO won’t go on a call and say; “oh they are boned but they’re still taking out debt to buy crap cause they’re addicted to shopping, just look at all the BNPL stuff”. Instead, it’s “no, not broke but uh…picky, sure that’s the right way to phrase that”.

However, value-seeking behavior is dominant. Shoppers are gravitating toward predictable sales events. We saw this with Techtober (Best Buy’s answer to Amazon’s October Prime Day) driving a sales spike, while non-promotional weeks were quieter. This suggests a holiday season where revenue might be high, but margins could be squeezed as retailers fight for every dollar with discounts.

Where Could They Do Better?

It wasn’t all sunshine and rainbows. There are distinct pockets of weakness in the business:

1. Appliances: This category is struggling, down significantly. The issue here isn’t Best Buy’s execution; it’s the housing market as shown recently with Home Depot’s earnings. People buy fridges when they move, and with housing turnover stagnant, appliance sales are mostly duress purchases (i.e., your washer broke, and you need a new one now). This limits the ability to sell premium packages.
2. Home Theater: TV sales were down in revenue, although units were up slightly. TV prices have fallen (deflation), meaning Best Buy has to sell more TVs just to make the same amount of money and as TVs get better and better, the upgrade just might not be worth it as much. However, that’s coming from someone that still has some 10 year old TV that looks just fine to me with no plans to upgrade until it breaks.
3. Gross Margins: The domestic gross profit rate slipped 30 basis points to 23.3%. This was driven by the deal-focused consumer we mentioned—more promos mean lower margins. That’s not great and certainly not a good sign going into the big holiday quarter.
4. Best Buy Health: While a long-term growth pillar, the Health division took a hit this quarter with a $192 million non-cash impairment charge. Management cited pressures in the Medicaid and Medicare Advantage markets, forcing them to revise their long-term projections downward. It’s a speed bump in what was supposed to be a smooth growth lane.

The Holiday Outlook and Guidance

Looking ahead to the rest of the year, management raised their full-year guidance, which is exactly what you want to see before Christmas.

• Full Year FY26 Guidance:
  • Revenue: $41.65 billion to $41.95 billion.
  • Comps: +0.5% to +1.2% (The midpoint suggests a solid return to annual growth).
  • Adjusted EPS: $6.25 to $6.35.

However, the Q4 specific guidance was a little more conservative than some bulls hoped. They are forecasting Q4 comps in the range of -1.0% to +1.0%. Why the slowdown from Q3’s +2.7%? Management noted that Q4 last year was actually quite strong, making for a tougher comparison. Also, outside of the Switch 2, the console gaming cycle (PlayStation/Xbox) is aging, which creates a natural drag on sales until the next big hardware refresh. That’s pretty mediocre and might mean that growth in the years ahead won’t be all that impressive either. The business seems to be trailing inflation and is still $10B below 2022 revenue(which was due to the pandemic spike) and still a bit below 2018 revenue. That’s not the type of growth you want to see from a business if you plan for it to be a long term hold.

Inside the Analyst Q&A: Key Takeaways

• “Why the deceleration in Q4?” Analysts were anxious about the guide down from +2.7% in Q3 to potentially negative in Q4. CFO Matt Bilunas explained that Q3 benefited heavily from back-to-school and Techtober(terrible name) timing. Q4 faces a shorter holiday shopping window and those tough gaming comparisons. They prefer to be prudent rather than overpromise.
• “What about Tariffs?” With trade policy always a hot topic, management was asked about pricing impacts. They noted that average selling prices (ASPs) are effectively flat. While tariffs are a reality, the consumer electronics industry is fiercely competitive. Best Buy can’t simply pass on every cost increase if they want to keep unit volume high. They are managing this through vendor partnerships and diversified sourcing. That means bad things for margins.
• “Is the Marketplace actually working?” Best Buy recently launched a third-party marketplace (similar to Amazon or Walmart). CEO Corie Barry revealed they now have over 1,000 sellers and 11x more SKUs online. Crucially, return rates for marketplace items are lower than first-party sales, and it’s becoming a neutral-to-positive contributor to profit. This is a massive strategic shift, allowing them to sell things like licensed sporting goods and baby monitors without owning the inventory risk. That does seem like a pretty good opportunity but I also wonder if they are dilluting what makes best buy what it is, I go there for tech and home appliances, I don’t really need to see sporting goods.
• “AI and the PC Cycle” Management remains very bullish on the AI PC. They believe we are in the early innings of a multi-year upgrade cycle driven by the need for more powerful local computing to run AI tasks. Right now I’m not so sure big upgrades are needed to handle what AI can currently do(and most people are using their phones over a personal PC for that type of stuff these days anyway) but there’s certainly potential in the future.

Valuation and Stock Performance: A 5-Year Journey

Zooming out on Best Buy’s price chart shows a pretty poor investment. The stock is down 12.8% in the past year and down 24.9% in the past 5 years. That’s during a period where the stock market was soaring while Best Buy trades at around 2018 stock prices. That’s not a huge surprise given that their revenue has barely moved since then. When you consider the inflationary pressures during that time frame, that speaks to a business that’s losing market share to other players and just keeping afloat with higher prices.

The stock did do just fine in 2020 and 2021 as demand pulled forward and revenue soared but it has pulled back quite a bit since then as that demand full forward sent revenue down.

Currently, with an adjusted EPS guide of roughly $6.30, Best Buy trades at a 12.5x multiple which certainly looks reasonable compared to the broader market but sits more in line with where Best Buy has typically traded. After all, you don’t really want to pay a premium for a business that has not grown revenue since 2018 and whose margins have compressed a bit since then too.

Investors are also paid to wait. Best has a 4.8% dividend yield which is about 53% of their LTM free cash flow with a good chunk of the rest going towards share buybacks. For income investors, the consistency of Best Buy’s capital returns (dividends + share buybacks) is a major selling point but the price has certainly headed nowhere making it a poor hold in the last few yewars.

The Competition: Fighting the Online Giants

It’s Cyber Monday, so we have to talk about Amazon and Walmart. How does Best Buy survive and thrive in this retail word? The answer likely lies in the need to pivot to an omnichannel fortress. Here are some things Best Buy is doing well.

1. Speed: You can pick up an item in-store one hour after ordering. In Q3, they achieved their fastest shipping fulfillment speeds ever.
2. Services: Amazon can drop a laptop at your door, but they can’t easily send a Geek Squad agent to set up your mesh Wi-Fi and transfer your data. Services remain Best Buy’s moat but I wonder if they become less and less valuable as the younger more tech savvy consumer takes over from the older less tech savvy consumer in the next decade.
3. Trade-Ins: Best Buy is aggressively marketing trade-in offers (up to $1,200 for old tablets!). This reduces the sticker shock of new premium devices, something online-only players struggle to facilitate as smoothly.
4. The Marketplace: By opening their website to third-party sellers, they are neutralizing the assortment gap. You can now find niche accessories on BestBuy.com that used to be Amazon exclusives. It remains to be seen whether they can make that transition smoothly. After all, when I think basketball, I don’t think Best Buy, I think anywhere else.

The Verdict: Is Best Buy a Buy?

So, is BBY worth a closer look for your portfolio?

The Bull Case:

• Growth is Back: Positive comps in Q3 are something to hang your hat on and the valuation isn’t crazy if you believe that they can return to mid single digit growth in the future.
• Innovation Cycle: We are entering a bigger replacement cycle for PCs (AI & Windows 10 end-of-life) and Gaming (Switch 2). Best Buy benefits disproportionately from hardware upgrades.
• Income: A solid, growing dividend makes it a safe defensive play although I don’t know if retail is something I’d hang my hat on for the next 10-20 years. I can certainly imagine a world where Best Buy no longer exists not too long from now.
• Valuation: It’s not priced like a high-flying tech stock, maybe in this market, some of these forgotten stocks left for dead are the ones that will do better in the next 5 years.

The Bear Case:

• Housing Market: Until people start moving houses again, appliances will drag down results.
• Promotional Environment: Margins are under pressure as consumers demand deals and that’s a big problem for a company that’s not even outpacing inflation on the top line.
• Q4 Uncertainty: The guidance for the holiday quarter is cautious, implying potential softness in December and likely into the next year as well.

Conclusion: If you are looking for a get rich quick AI play, this isn’t it. But if you want a fairly valued, cash-generating retailer that has survived the Amazon onslaught so far and is positioned well for the coming hardware upgrade super-cycle, Best Buy looks vaguely interesting. The return to positive comparable sales is the signal many investors were waiting for.

As a potential buy? It’s not for me. Yes, there’s a nearly 5%, dividend yield, a reasonable P/E ratio, and the tailwinds of AI hardware upgrades but I’d need to see more than just low single digit comp growth against a 3% inflation rate to get interested. I think this should be trading at a lower P/E with their lack of growth for the past 8 years to be interesting.

Happy Cyber Monday shopping to all. Buy anything at Best Buy today(or in the last 5 years)?

Disclaimer: This article is for informational purposes only and does not constitute financial advice. The author is not a registered financial advisor. All investment strategies and investments involve risk of loss. The content is based on data available as of December 1, 2025, and references potential valuation scenarios created by the author. Always perform your own due diligence before making any investment decisions.