S&P 500   5,137.08
DOW   39,087.38
QQQ   445.61
South Korean doctors hold massive anti-government rally over medical school recruitment plan
Critical asset just had biggest fall on record (Ad)
Nobel laureate Muhammad Yunus is granted bail in a Bangladesh graft case
Trader Joe's chicken soup dumplings recalled for possibly containing permanent marker plastic
Critical asset just had biggest fall on record (Ad)
The former chairman of the state-owned Bank of Beijing is being investigated for alleged corruption
Chicago 'mansion' tax to fund homeless services stuck in legal limbo while on the ballot
Critical asset just had biggest fall on record (Ad)
What to watch for as China's major political meeting of the year gets underway
Head Start preschools aim to fight poverty, but their teachers struggle to make ends meet
S&P 500   5,137.08
DOW   39,087.38
QQQ   445.61
South Korean doctors hold massive anti-government rally over medical school recruitment plan
Critical asset just had biggest fall on record (Ad)
Nobel laureate Muhammad Yunus is granted bail in a Bangladesh graft case
Trader Joe's chicken soup dumplings recalled for possibly containing permanent marker plastic
Critical asset just had biggest fall on record (Ad)
The former chairman of the state-owned Bank of Beijing is being investigated for alleged corruption
Chicago 'mansion' tax to fund homeless services stuck in legal limbo while on the ballot
Critical asset just had biggest fall on record (Ad)
What to watch for as China's major political meeting of the year gets underway
Head Start preschools aim to fight poverty, but their teachers struggle to make ends meet
S&P 500   5,137.08
DOW   39,087.38
QQQ   445.61
South Korean doctors hold massive anti-government rally over medical school recruitment plan
Critical asset just had biggest fall on record (Ad)
Nobel laureate Muhammad Yunus is granted bail in a Bangladesh graft case
Trader Joe's chicken soup dumplings recalled for possibly containing permanent marker plastic
Critical asset just had biggest fall on record (Ad)
The former chairman of the state-owned Bank of Beijing is being investigated for alleged corruption
Chicago 'mansion' tax to fund homeless services stuck in legal limbo while on the ballot
Critical asset just had biggest fall on record (Ad)
What to watch for as China's major political meeting of the year gets underway
Head Start preschools aim to fight poverty, but their teachers struggle to make ends meet
S&P 500   5,137.08
DOW   39,087.38
QQQ   445.61
South Korean doctors hold massive anti-government rally over medical school recruitment plan
Critical asset just had biggest fall on record (Ad)
Nobel laureate Muhammad Yunus is granted bail in a Bangladesh graft case
Trader Joe's chicken soup dumplings recalled for possibly containing permanent marker plastic
Critical asset just had biggest fall on record (Ad)
The former chairman of the state-owned Bank of Beijing is being investigated for alleged corruption
Chicago 'mansion' tax to fund homeless services stuck in legal limbo while on the ballot
Critical asset just had biggest fall on record (Ad)
What to watch for as China's major political meeting of the year gets underway
Head Start preschools aim to fight poverty, but their teachers struggle to make ends meet

Feel like buying the dip on Best Buy? Your gut may be right

Key Points

  • Best Buy shares have been beaten down enough this year, but there is hope in the numbers.
  • A clear sector outlier shows you why its current valuation is unjustified, so take advantage.
  • Insiders and analysts are all over this stock, hoping that the near future will bring double-digit rallies.
  • 5 stocks we like better than DICK'S Sporting Goods

Best Buy storefront

Sometimes, buying the dip on a stock can turn into trying to catch a falling knife, and the consequences may be more expensive than a hospital visit and a few stitches. However, there are times when being a contrarian and buying the dip on the right stock can do wonders for your wealth-creation journey.

Today, the consumer discretionary sector has offered investors tons of bullish momentum, as the Consumer Discretionary Select Sector SPDR Fund NYSEARCA: XLY has beaten the broader S&P 500 by as much as 11.3% on a year-to-date basis. However, one name has yet to receive its fair share.

Best Buy Co. Inc. NYSE: BBY has been disregarded by the market as it is perceived to be losing market share to retail giants like Amazon.com Inc. NASDAQ: AMZN. Management is aware of this, and so are analysts, which is why today's perception is as important as it has ever been.

Right levels

When looking at Best Buy's stock chart, you can immediately notice how the recent downturns have thrown it into the "golden ratio" of Fibonacci levels. Being within the 68% to 72% retracement and surpassing this level could imply that the stock is approaching an interesting demand zone.


As most savvy investors know, technical analysis is only the beginning for the long hours ahead for picking the right stock. We've done the homework, so learn why Best Buy may be your best pick this quarter.

Beginning with price action, you know the sector is in a full bull market. However, Best Buy stock is showing symptoms of a bear market. As defined by Wall Street as a 20% or larger discount from recent highs, it fits the description.

Best Buy stock is trading at 73% of its 52-week high prices, whereas competitors like Deckers Outdoor Corp. NYSE: DECK and DICK's Sporting Goods Inc. NYSE: DKS trade at much more favored rates of 99% and 81%, respectively. However, this is only the beginning.

Despite a disappointing sales figure in their latest quarterly financial results, Best Buy management pointed to increasing profitability and more streamlined operations. That's what you should be hoping to hear from this company.

Because Best Buy is still ramping up its online sales segment, keeping costs under control while reinventing its business model is critical, so increasing operating margins should be music to your ears. Moreover, sales have also declined for competitors, so don't worry.

They don't want you to know

Beating down the stock is a classic big-money strategy: scare away the retail investors so that they can pick up cheap shares and then pump out the good media surrounding the business. In the case of Best Buy, the market knows something you don't.

While the retail consumer electronics industry should grow its EPS by an average of 8% in the next 12 months, analysts projected a 9.8% jump for Best Buy's earnings. However, the stock is still trading at a 10.9x P/E, which implies an attractive 40.1% discount to the industry's average 18.2x multiple.

Because earnings will grow past the industry average, and the quality of these earnings is increasing due to management efforts to restructure costs, markets should be willing to pay a higher premium for the stock, right?

Because most of the market, as you now know, has been scared off with bearish price action, only insiders are willing to commit capital to this cheap valuation. And when insiders put their money where their mouth is, you bet something big is cooking.

Management has repurchased $270 million worth of stock in 2023, representing nearly 2% of the company's market capitalization, not a statistic you'd want to pay attention to.

As it turns out, Invesco NYSE: IVZ, which happens to be Best Buy's largest shareholder, has upped its position by as much as 8.7% in November of 2023. Considering the current stock levels, it seems to be an extremely well-timed purchase.

These insider purchases have given analysts enough confidence to place a $77.9 share price target on Best Buy, calling for a 15.2% rally from today's prices to meet it. The outlook for management strategy is holding up on the positive end of things. 

→ This is the #1 Stock to Buy for the AI Tidal Wave (From Chaikin Analytics) (Ad)

Should you invest $1,000 in DICK'S Sporting Goods right now?

Before you consider DICK'S Sporting Goods, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and DICK'S Sporting Goods wasn't on the list.

While DICK'S Sporting Goods currently has a "Hold" rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

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Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Invesco (IVZ)
4.7094 of 5 stars
$15.53+0.8%5.15%-20.99Hold$17.15
Amazon.com (AMZN)
4.8956 of 5 stars
$178.22+0.8%N/A61.46Buy$197.95
Deckers Outdoor (DECK)
4.0125 of 5 stars
$903.29+0.9%N/A32.49Moderate Buy$854.86
Consumer Discretionary Select Sector SPDR Fund (XLY)N/A$185.02+0.3%0.75%N/AHold$0.07
Best Buy (BBY)
4.5146 of 5 stars
$77.92-3.7%4.72%13.69Hold$82.80
DICK'S Sporting Goods (DKS)
4.3735 of 5 stars
$181.24+1.9%2.21%16.17Hold$144.19
Compare These Stocks  Add These Stocks to My Watchlist 

Gabriel Osorio-Mazilli

About Gabriel Osorio-Mazilli

  • gosoriomazzilli@gmail.com

Contributing Author

Value Stocks, Asian Markets, Macro Economics

Experience

Gabriel Osorio-Mazilli has been a contributing writer for MarketBeat since 2023.

Areas of Expertise

Value investing, long/short trading, options, emerging markets

Education

CFA Level I candidate; Goldman Sachs corporate training; independent courses

Past Experience

Analyst at Goldman Sachs, associate at Citigroup, senior financial analyst in real estate


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