M. Suhail/iStock Editorial via Getty Images Investment overview I wrote about Best Buy Co., Inc. ( BBY ) previously with a buy rating, as BBY was indeed showing that growth was inflecting and margins were improving. I am now moving to a hold rating. The quarter was good, and the core parts of my earlier thesis are still playing out: CSG turned positive, Marketplace and Ads are scaling, and margins...
M. Suhail/iStock Editorial via Getty Images Investment overview I wrote about Best Buy Co., Inc. ( BBY ) previously with a buy rating, as BBY was indeed showing that growth was inflecting and margins were improving. I am now moving to a hold rating. The quarter was good, and the core parts of my earlier thesis are still playing out: CSG turned positive, Marketplace and Ads are scaling, and margins expanded. But the setup is no longer as clean. Appliances and CE remain weak, guidance was not raised, and the stock already reflects a good portion of the improvement. 1Q27 earnings BBY reported Q1 2027 results a while back, with revenue up ~2% y/y to $8.9 billion, of which comparable Enterprise sales grew 2%, a clear step up from the -0.7% seen last year. Domestic revenue saw ~$8.25 billion, up 1.5% y/y, supported by 1.8% comparable sales growth (CSG). International revenue saw $687 million, up 7.3% y/y, driven by 4.7% CSG and a favorable FX impact. Domestic online revenue saw $2.6 billion, supported by 1.4% CSG, driven by gaming, computing, mobile phones, and services. By category, Domestic Computing and Mobile Phones grew 4.2% CSG, Consumer Electronics (CE) fell 2.7%, mainly from home theater, headphones, and portable speakers. Appliances fell ~14%, mainly from large appliances. Services, on the other hand, grew 5.5%, helped by Best Buy Marketplace and credit card revenue. Entertainment was a small mix of revenue (7% of Domestic revenue) but grew the fastest at ~38%, driven mainly by gaming. Finally, International did better vs. domestic, with mobile phones, gaming, and digital imaging driving CSG. It was also encouraging that profits went up alongside revenue with consolidated gross profit coming in at ~$2.1 billion, and margins up by 10bps y/y to 23.5%. While that seemed small, operating leverage was evident as EBIT went up significantly to $370 million, vs. $219 million last year, and EBIT margin expanded by 160bps y/y to 4.1%. Overall, this led to adj. diluted EPS ...