Best Buy stock jumps 18%: Here’s why Jefferies sees more upside

Shares of Best Buy BBY surged 18% on Thursday after the electronics retailer reported stronger-than-expected first-quarter earnings, boosted by higher margins and modest sales growth.

The stock rally followed quarterly operating earnings of $1.28 per share, up from $1.15 a year earlier.

Revenue rose 2% year over year to $8.94 billion from $8.78 billion, while same-store sales increased 2%.

Despite the sharp gain, investor attention has increasingly shifted toward the company’s dividend, which currently yields around 5%, among the highest payouts in the S&P 500.

Best Buy shares traded around $76 during Thursday’s session, still below their October 2025 high near $84.

Dividend outlook strengthens as Jefferies turns bullish

The company’s latest results reinforced confidence that the dividend remains well supported despite concerns about slowing consumer electronics demand and rising memory costs.

Best Buy currently pays a quarterly dividend of 96 cents per share, translating to an annualized payout of $3.84 per share.

Wall Street analysts expect the company to generate fiscal 2027 earnings of approximately $6.48 per share, comfortably covering the dividend obligation.

In addition to dividends, Best Buy said it repurchased $202 million worth of stock during the first quarter and plans to buy back another $300 million by the end of the fiscal year.

The company maintained its full-year operating earnings guidance of $6.30 to $6.60 per share, compared with $6.43 in fiscal 2026.

Jefferies also raised its price target on Best Buy shares to $89 from $83 while maintaining a Buy rating, citing stronger-than-expected comparable sales and improving momentum.

The firm noted that growth in third-party marketplace operations and advertising initiatives through Best Buy Ads could provide additional margin expansion opportunities that remain underappreciated by the market.

Memory shortage raises pricing concerns

Investors remain cautious about the broader outlook for consumer electronics demand as rising memory chip costs threaten to increase prices for PCs and other technology products.

The memory shortage, sometimes referred to as “RAMageddon,” has raised concerns that higher hardware prices could discourage consumer purchases.

Incoming CEO Jason Bonfig acknowledged the pressure during a call with reporters.

“We did see some staggered price increases in Q1. As we move into Q2, we do expect ASPs to increase, and units from an elasticity perspective to be impacted,” Bonfig said. “We continue to work very closely with our vendors to mitigate this.”

However, executives suggested consumers have not yet shown signs of pulling forward purchases due to pricing fears.

“We are not seeing any indicators that would say the customer's pulling forward purchases. In fact, very few are worried about memory,” CEO Corie Barry said.

“While they're thoughtful about the big-ticket buys, they're absolutely willing to spend on those high price points when they need to or when the technology is compelling enough,” she added.

Bonfig echoed similar comments.

“They don't walk into our store with fear about memory prices, and we're not seeing any indication that they're pulling core purchases as a result of it,” he said.

Best Buy expands beyond traditional electronics retail

Best Buy has also continued diversifying beyond its traditional electronics business.

Last August, the company launched Best Buy Marketplace, allowing third-party sellers to offer products through its platform.

The retailer has also expanded its digital advertising business through Best Buy Ads, following strategies used by larger retail rivals including Amazon and Walmart.

The company reported sales growth across gaming, computing, mobile phones, and services during the quarter.

Appliance sales remained weaker due to a sluggish housing market, though management said recent improvements in marketing and delivery speed helped performance improve during May and the Memorial Day shopping period.

While analysts do not expect Best Buy to become a high-growth technology stock, the combination of stable earnings, shareholder returns, and a sizable dividend continues attracting income-focused investors.