🤔 Is Best Buy a Good Buy?

Plus, the shocking percent of consumers who now view fast food as a luxury

Happy Thursday afternoon to everyone on The Street. Here's a snapshot of where markets ended the trading session, plus tomorrow's trade idea delivered to you today.

  • 🟨 | US Stocks Changed Little on Thursday. All three major indexes hovered around flat as Wall Street waits for Friday’s nonfarm payrolls report. Investors are looking for signs of a weakening labor market that would prompt rate cuts from the Fed.

  • 📈 | One Notable Gainer: Shares of Instacart’s parent company Maplebear popped 9% on news that the company’s board approved another $500 million share repurchase program.

  • 📉 | One Notable Decliner: Fluence Energy’s stock sunk 8% after researchers at Guggenheim downgraded it from Buy to Neutral, saying the company is fairly valued after a recent rally.

  • 🤔 | Tomorrow's Trade: Is Best Buy a Good Buy? Scroll down for more.

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YESTERDAY’S POLL RESULTS

🟩🟩🟩🟩🟩🟩 Meta (META)

🟨🟨🟨🟨🟨⬜️ Alphabet (GOOG)

S&P 500 Heatmap. Credit: Finviz

All Stock Heatmap. Credit: Finviz

Global ADR snapshot. Credit: Finviz

MARKET MOVERS

AAL (-2%) American Airlines faces a continuing flight attendant strike after its flight attendant union rejected the airline’s proposed 17% pay raise (CNBC)

CRM (+3%) Shares of Salesforce rose after Mason Morfit, co-CEO of Value Act, disclosed that he acquired $99 million worth of shares this earlier week (CNBC)

SJM (+4%) JM Smucker reported quarterly earnings that flew past estimates, with EPS of $2.66 easily beating Wall Street’s $2.35 prediction (Barron’s)

RARE (+1%) Goldman Sachs upgraded Ultragenyx Pharmaceutical from Neutral to Buy due to increasing confidence in its bone disorder treatment (SA)

STNE (+2%) Fin-tech company StoneCo saw shares rise following a JPMorgan upgrade from Neutral to Overweight, claiming it can surge 50% (CNBC)

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OVERHEARD ON THE STREET

WSJ: The aging US power grid is about to leap into the 21st century as the Biden administration scrambles to meet a coming burst of new power demand.

CNBC: The FTC is building a lawsuit against the largest American alcohol distributor, Southern Glazer’s Wine and Spirits, alleging secret kickbacks.

Bloomberg: The US trade deficit widened in April to the largest since October 2022 on a surge in imports of motor vehicles, computers, and industrial supplies.

CBS: Rubio’s Coastal Grill, founded more than 40 years ago, has filed for bankruptcy days after closing more than a dozen restaurants in San Diego.

CNN: Nvidia has surpassed Apple to become the second-largest public company in the US as the AI darling continues to swell to staggering heights.

TOMORROW’S TRADE IDEA, TODAY

Recent Gains

Best Buy (BBY) stock jumped 13% after its earnings call last week. One of the main takeaways from the call was the excitement surrounding the retailer's new inventory of exclusive AI laptops.

According to Citi (C), Best Buy controls a third of the market for computer sales, with around 25% of those sales coming from laptops. It’s now offering 40 new laptops from big names like Microsoft (MSFT) and Dell (DELL). 

As a result, Citi upgraded the stock from “sell” to “buy” with a $100 price target. Time will tell if consumers feel the same excitement as Best Buy’s executives and investors.

Sales Slowdown

One of the biggest questions facing the retailer is whether inflation-plagued consumers will be willing to pay for laptops offering AI functions they can find online for free. 

Best Buy saw significant growth during the pandemic, fueled largely by stimulus payments and Americans’ desire to upgrade in-home offices. Since then, the company has seen 10 consecutive quarters of slumping sales. 

Early signs suggest that consumers are starting to replace laptops, with year-over-year laptop sales showing slight growth over the past two quarters.

Long-Term Questions

According to analysts, Best Buy typically gets a boost whenever there’s technological innovation in the computing industry. Right now that boost is coming from the AI craze. 

Analysts also note that Best Buy has been losing market share over the past several years. Some attribute this to a lackluster buying experience following the company’s decision to slash almost a third of its workforce over the past four years. 

Appliance sales are also down, and the stock is currently around 18% more expensive based on multiples than it was during the five years preceding the pandemic. 

The recent stock growth is undeniable, but Best Buy’s long-term growth is far from a sure thing.

Are you bullish or bearish on Best Buy over the next 12 months?

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Discover unparalleled speech clarity with this advanced, state-of-the-art hearing aid.

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ON OUR RADAR

WSJ: The share of super commutes — those 75 miles or longer — are up by nearly a third since 2020, according to new research from Stanford University.

Reuters: European advocacy group NOYB is urging action against Meta for using personal data to train its artificial intelligence models without consent.

NYP: Two more Boeing whistleblowers have gone public, claiming they are more determined than ever to uncover the company’s dangerous practices.

Lending Tree: 78% of consumers view fast food as a luxury due to rising prices, and half view fast food as a luxury because they’re struggling financially.

WSJ: Texas is now home to more Fortune 500 companies, including Exxon Mobil, AT&T, and American Airlines, than any other state.

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