Best Buy's (BBY) stock dropped by 7% following an unexpected earnings miss in Q3, marking the company's first such miss in five years.
The electronics retailer reported a -2.9% drop in same-store sales, significantly below its forecast of around -1%.
Despite some improvement in customer demand recently, Best Buy’s management lowered its financial guidance for fiscal year 2025.
For the current quarter, adjusted earnings per share of $1.26 fell short of expectations. The earnings miss was due to high promotional activities that failed to significantly boost revenue activity. The results contrast with small improvements in previous quarters where promotional strategies seemed more effective.
Revenue decreased by 3.2% year-over-year to $9.45 billion, missing analyst projections.
Management attributed this decline to ongoing macroeconomic uncertainties. Despite an improvement in consumer confidence, Best Buy customers have been delaying purchases in anticipation of deals. The company also blamed distractions from the recent elections.
Notably, sales in appliances, home theater, and gaming were weak, continuing a troubling trend and raising concerns about losing market share to competitors like Costco, which offers more attractive service terms.
There were positive developments in the computing and tablets sector, with a 5.2% increase in combined comparable sales. Laptops alone surged 7.0% in sales.
There was minimal mention of AI PCs, though it was mentioned that advancements in AI are expected to drive PC demand in the coming years.
Following the quarter's results, Best Buy lowered its guidance for earnings per share and revenue and adjusted its same-store sales growth forecast to -2.5% to -3.5%.
Investors didn’t take the news well as the 7% drop in price was accompanied by heavy volume.
Those wondering what a “buy the rumor, sell the news” move in a stock looks like need look no further than Best Buy shares over the last two days.
Investors drove Best Buy shares 7.5% higher in the two days ahead of the earnings report. That was a clear “buy the rumor move.
Today’s decline represents the “sell the news”, but there’s more in the charts to read.
Best Buy’s move to $85 today tests the stock’s 200-day moving average. Just two teeks ago, the stock’s 50-day moving average turned bearish, indicating lower prices for the next 4-6 weeks.
The pending break below the stock’s 200-day moving average serves as notice to investors that volatility and lower prices should be expected through March.
Shares of Constellation Energy (CEG) jumped more than 6% on Tuesday on relatively light volume.
Constellation Energy Generation operates as a major producer of clean energy in the United States. The company focuses on generating power through nuclear, solar, wind, and hydroelectric sources, aiming to provide sustainable and reliable energy solutions while reducing environmental impact.
In September, Constellation stock jumped more that 40 percent in less than three weeks. The move came after announcing a 20-year power purchase agreement with Microsoft.
The deal is centered on the reopening and operation of the Three Mile Island Unit 1. That unit was rebranded as the Crane Clean Energy Center.
The deal involves Microsoft purchasing carbon-free energy to power its data centers, aligning with its sustainability goals.
The initiative will also contribute significantly to the local economy by creating 3,400 jobs and is part of a broader effort to provide reliable, clean energy from nuclear sources.
Last week, several institutions reported new positions in Constellation Energy’s stock as part of their periodic 13F filings. The new interest from large institutional money managers suggests that Wall Street sees more future value in the deal with Microsoft.
After the original 30% rally, shares of Constellation Energy dropped 20% from their October highs as short-term traders appeared to use the opportunity to lock in profits.
Since then, the stock has consolidated to form a tradable bottom at $225.
Today’s move puts the stock back above its bullishly trending 50-day moving average. This trendline is one of the most watched trendlines on Wall Street and is know for best representing whether a stock’s trend is “friendly” or not.
Investors should expect that today’s move higher will spark a new intermediate-term rally, attracting new buyers as the stock targets a move to $300.
First Best Buy, then Kohl’s (KSS)…
Shares of discount retailer Kohl’s are trading 15% lower as investors are “selling the news” of the company’s earnings.
Early Tuesday morning, Kohl’s announced earnings of $0.20 per share, which was $0.08 below the expected $0.28 Wall Street consensus.
The company's revenues decreased by -8.5% year-over-year to $3.71 billion, just slightly above the anticipated $3.64 billion. However, those comparable sales dropped by 9.3%. This is the eleventh quarter in a row of declining revenue for Kohl’s, signaling fundamental issues for the company.
Looking ahead, Kohl's provided a lower-than-expected forecast for its fiscal year 2025. Management is predicting earnings per share between $1.20 and $1.50, falling short of the $1.81 consensus.
Revenue projections for 2025 also show a decline of 7-8% year-over-year, now estimated between $15.26 billion and $15.42 billion, compared to the expected $15.68 billion.
The fundamental challenges resulted in the announcement of significant leadership changes for the company.
Kohl’s CEO Tom Kingsbury is stepping down on January 15, 2025, but will remain as an advisor to the new CEO and retain his board position until May 2025.
Ashley Buchanan, a seasoned retail executive, has been appointed as the new CEO and board member effective January 15, 2025. The transition marks a pivotal moment for Kohl's as it navigates through a challenging retail environment.
Investors aren’t sending the message of confidence with today’s trading. Like Best Buy, Kohl’s saw significant buying ahead of Today’s earnings report as investors hoped the company would have better results. That hope is now fading to the reality that the stock is headed lower.
Kohl’s stock is now moving towards a break below its pandemic lows of $10. In 2020, shares traded in a wide range around $15 after dipping to $10, a psychologically significant price level for any stock.
With Kohl’s already trading in a long-term bear market trend, investors should consider the stock a risky proposition with a target price of $10.
