Why Best Buy Stock Jumped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Best Buy were soaring again today, climbing as much as 17% on a strong second-quarter earnings report.

So what: The big-box electronics retailer now seems to be in the full throes of a turnaround, its stock price having tripled in the past year. Earnings improved this time around due to cost-cutting and online sales initiatives, coming in after adjustments at $0.32 per share, well ahead of estimates at $0.12 and up from just $0.04 a year ago. Online sales jumped 10.5% in the period, but comparable in-store sales fell 0.6%, and revenue edged down 0.4% to $9.3 billion. That sum was still better than analyst expectations at $9.13 billion.

Now what: This was certainly a promising report for Best Buy, but with shares already having appreciated so much this year, the price may be reaching a ceiling. Best Buy is now valued at a P/E of 15 based on this year's earnings, less than Wal-Mart's at 14, which is generally considered a much stronger retailer. Best Buy appears to be on its way to full health, but I wouldn't expect serious growth until same-store sales are moving in the right direction.

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The article Why Best Buy Stock Jumped originally appeared on Fool.com.

Fool contributor Jeremy Bowman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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