Winter is Coming, Morgan Stanley Reiterates Equalweight Rating on Best Buy (BBY)

Morgan Stanley analyst Simeon Gutman reiterated an Equalweight rating and $120.00 price target on Best Buy (NYSE: BBY) on the belief that despite strong recent data that drove shares up 15% in the last month, momentum will likely slow in 2022/23.

The analyst stated "a deceleration is almost certainly coming, and Q3's category growth marked the beginning (12% growth compared with 27% in Q2, and the 2 year stack shrunk as well). The larger debate is twofold: 1) next year's topline at the category level, and 2) BBY's margin structure (will EBIT margin hold around 6% or revert closer to 5%). Based on our recent PCE reversion model, we expect the category to shrink in both '22 and '23 as Durable Goods share of PCE reverts to roughly pre-COVID levels. BBY has historically undergrown the larger category, and if this continues comps should be negative in '22/'23. On declining sales in the medium-term, we are skeptical that EBIT margins normalize at 6% or higher."

For an analyst ratings summary and ratings history on Best Buy click here. For more ratings news on Best Buy click here.

Shares of Best Buy closed at $132.36 yesterday.

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