BBY
BBY
Accumulate 2026-03-18
Model
DCF
Price at Report
$62.62
Base IV
$84.59
Bear IV
$54.94
Bull IV
$115.11
Entry Zone: 58-78 · Sell Above: 98
Bore Family Office
Valuation Report — Best Buy Co., Inc. (BBY) • March 18, 2026
Unlevered DCF (FCFF @ WACC) • Discount Rate: 9.12% • Current Price: $62.62
Prepared by Lurch • Bore Family Office • Data: Finnhub, StockAnalysis.com, S&P Global Market Intelligence
🏢 Business Overview
Best Buy is the largest US specialty retailer of consumer electronics and appliances, operating approximately 1,000 stores across the US and Canada plus a robust e-commerce platform that accounts for ~33% of revenue. The company sells consumer electronics (TVs, computing, phones), appliances, gaming, and related services through its Geek Squad brand.
Best Buy faces the structural challenge of being a brick-and-mortar retailer in a category where Amazon and direct-to-consumer brands have significant advantages. However, BBY has defended its position through Geek Squad in-home services, manufacturer partnerships, and a Best Buy Totaltech membership program that drives recurring revenue. Revenue has contracted from $51.8B (FY2022) to $41.7B (FY2026) as post-COVID demand normalization and competitive pressures weigh on volumes, though profitability has been better managed than peers through disciplined cost management.
| Business Segment | Revenue | % of Total | YoY Growth | Margin | Notes |
|---|---|---|---|---|---|
| Domestic | $38,800M | 93% | +0.3% | — | US stores + online (~33% of rev) |
| International (Canada) | $2,900M | 7% | +0.5% | — | Canadian retail operations |
📊 Financial Snapshot
| Metric | 2022 | 2023 | 2024 | 2025 | 2026 |
|---|---|---|---|---|---|
| Revenue ($M) | $51,761 | $46,298 | $43,452 | $41,528 | $41,691 |
| EBITDA ($M) | $3,908 | $2,713 | $2,497 | $2,128 | $2,220 |
| Operating Income ($M) | $3,039 | $1,795 | $1,574 | $1,262 | $1,389 |
| Net Income ($M) | $2,454 | $1,419 | $1,241 | $927 | $1,069 |
| EPS (diluted) | $9.84 | $6.29 | $5.68 | $4.28 | $5.04 |
| Free Cash Flow ($M) | $2,515 | $894 | $675 | $1,392 | $1,258 |
| Annual DPS | $2.980 | $3.520 | $3.680 | $3.760 | $3.840 |
| Total Debt ($M) | $3,255 | $3,978 | $3,982 | $4,053 | $4,133 |
| Rev YoY Growth | — | -10.6% | -6.1% | -4.4% | +0.4% |
| EBITDA Margin | 7.6% | 5.9% | 5.7% | 5.1% | 5.3% |
| Operating Margin | 5.9% | 3.9% | 3.6% | 3.0% | 3.3% |
| Net Margin | 4.7% | 3.1% | 2.9% | 2.2% | 2.6% |
📈 DCF Scenarios
$55
🔴 Bear
$85
📊 Base
$115
🚀 Bull
$62.62
Current Price
$79
Analyst Avg PT
| Scenario | Stage 1 (Yrs 1–5) | Stage 2 (Yrs 6–10) | Terminal g | WACC | Intrinsic Value | vs Price |
|---|---|---|---|---|---|---|
| 🔴 Bear | -2.0% | 0.0% | 1.5% | 9.12% | $55 | ▼12.3% |
| 📊 Base | 4.0% | 3.0% | 2.0% | 9.12% | $85 | ▲35.1% |
| 🚀 Bull | 8.0% | 5.0% | 2.5% | 9.12% | $115 | ▲83.8% |
📋 Full 10-Year Projection Tables
Bear Scenario
Stage 1: -2.0% | Stage 2: 0.0% | Terminal: 1.5%
| Period | Stage | FCFF | PV of FCFF | Cumulative EV |
|---|---|---|---|---|
| Year 1 ✦ | Stage 1 | $1.23B | $1.13B | $1.13B |
| Year 2 ✦ | Stage 1 | $1.21B | $1.01B | $2.14B |
| Year 3 ✦ | Stage 1 | $1.18B | $0.91B | $3.06B |
| Year 4 ✦ | Stage 1 | $1.16B | $0.82B | $3.87B |
| Year 5 ✦ | Stage 1 | $1.16B | $0.75B | $4.62B |
| Year 6 | Stage 2 | $1.16B | $0.69B | $5.31B |
| Year 7 | Stage 2 | $1.16B | $0.63B | $5.94B |
| Year 8 | Stage 2 | $1.16B | $0.58B | $6.52B |
| Year 9 | Stage 2 | $1.16B | $0.53B | $7.05B |
| Year 10 | Stage 2 | $1.16B | $0.48B | $7.53B |
| Terminal | — | TV=$15.5B | PV(TV)=$6.5B (46% of EV) | EV=$14.0B |
Base Scenario
Stage 1: 4.0% | Stage 2: 3.0% | Terminal: 2.0%
| Period | Stage | FCFF | PV of FCFF | Cumulative EV |
|---|---|---|---|---|
| Year 1 ✦ | Stage 1 | $1.31B | $1.20B | $1.20B |
| Year 2 ✦ | Stage 1 | $1.36B | $1.14B | $2.34B |
| Year 3 ✦ | Stage 1 | $1.41B | $1.09B | $3.43B |
| Year 4 ✦ | Stage 1 | $1.47B | $1.04B | $4.47B |
| Year 5 ✦ | Stage 1 | $1.53B | $0.99B | $5.46B |
| Year 6 | Stage 2 | $1.58B | $0.93B | $6.39B |
| Year 7 | Stage 2 | $1.62B | $0.88B | $7.27B |
| Year 8 | Stage 2 | $1.67B | $0.83B | $8.10B |
| Year 9 | Stage 2 | $1.72B | $0.79B | $8.89B |
| Year 10 | Stage 2 | $1.77B | $0.74B | $9.63B |
| Terminal | — | TV=$25.4B | PV(TV)=$10.6B (52% of EV) | EV=$20.2B |
✦ Year-by-year analyst consensus FCF estimates (Base scenario)
Bull Scenario
Stage 1: 8.0% | Stage 2: 5.0% | Terminal: 2.5%
| Period | Stage | FCFF | PV of FCFF | Cumulative EV |
|---|---|---|---|---|
| Year 1 ✦ | Stage 1 | $1.36B | $1.25B | $1.25B |
| Year 2 ✦ | Stage 1 | $1.47B | $1.23B | $2.48B |
| Year 3 ✦ | Stage 1 | $1.58B | $1.22B | $3.70B |
| Year 4 ✦ | Stage 1 | $1.71B | $1.21B | $4.90B |
| Year 5 ✦ | Stage 1 | $1.85B | $1.19B | $6.10B |
| Year 6 | Stage 2 | $1.94B | $1.15B | $7.25B |
| Year 7 | Stage 2 | $2.04B | $1.11B | $8.35B |
| Year 8 | Stage 2 | $2.14B | $1.06B | $9.42B |
| Year 9 | Stage 2 | $2.25B | $1.02B | $10.44B |
| Year 10 | Stage 2 | $2.36B | $0.99B | $11.43B |
| Terminal | — | TV=$36.5B | PV(TV)=$15.3B (57% of EV) | EV=$26.7B |
🔲 Sensitivity Table
| WACC \ gT | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 7.1% | $116 | $124 | $133 | $145 | $161 |
| 7.6% | $105 | $111 | $119 | $128 | $140 |
| 8.1% | $96 | $101 | $107 | $114 | $123 |
| 8.6% | $88 | $92 | $97 | $103 | $110 |
| 9.1% | $81 | $85 | $89 | $94 | $99 |
| 9.6% | $75 | $78 | $82 | $86 | $90 |
| 10.1% | $70 | $73 | $76 | $79 | $83 |
| 10.6% | $66 | $68 | $70 | $73 | $76 |
| 11.1% | $61 | $63 | $65 | $68 | $70 |
Green = >10% above current price. Red = >10% below. Gold = within ±10%.
📉 Long-Term Price Trend Channel
Log-linear trend fitted to full price history. ±1.5σ bands. Green shaded zone = bottom 25% of historical range — historically attractive entry.
💰 Dividend / Distribution Analysis
| Metric | Value |
|---|---|
| Annual DPS | $3.840 |
| Current Yield | 6.13% |
| Consecutive Growth Years | 21 |
| 1-yr DPS CAGR | +1.1% |
| 3-yr DPS CAGR | +3.0% |
| 5-yr DPS CAGR | +5.2% |
| 10-yr DPS CAGR | +11.5% |
| Payout Ratio (DPS/EPS) | 76.2% ⚠️ |
| FCF Payout Ratio | 64.6% |
| Sustainability Verdict | ⚠️ Watch |
BBY's $3.84/yr dividend is under moderate watch. The 76% EPS payout ratio is elevated relative to the 50-60% target management has historically guided toward, reflecting EPS compression over 2022-2025 while management maintained the dividend. As EPS recovers toward $6.50-7.00 (analyst consensus by FY2028), payout ratio normalizes to 55-59%. FCF payout ratio of 64.6% is sustainable. Management has grown the dividend for 21 consecutive years and shows no signs of cutting. However, if the AI refresh cycle disappoints and EPS stays below $5, payout above 80% warrants a reassessment. Watch.
🔮 Analyst Forecast Section
(a) EPS Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|---|---|---|---|---|
| 2022 | $9.84 | — | — | — | Actual |
| 2023 | $6.29 | — | — | — | Actual |
| 2024 | $5.68 | — | — | — | Actual |
| 2025 | $4.28 | — | — | — | Actual |
| 2026 | $5.04 | — | — | — | Actual |
| 2027 | $5.72 | $6.73 | $7.51 | 27 | Estimate |
| 2028 | $6.00 | $7.27 | $8.77 | 19 | Estimate |
(b) Revenue Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|---|---|---|---|---|
| 2022 | $51.8B | — | — | — | Actual |
| 2023 | $46.3B | — | — | — | Actual |
| 2024 | $43.5B | — | — | — | Actual |
| 2025 | $41.5B | — | — | — | Actual |
| 2026 | $41.7B | — | — | — | Actual |
| 2027 | $40.1B | $42.7B | $45.3B | 27 | Estimate |
| 2028 | $40.5B | $43.4B | $46.7B | 19 | Estimate |
(c) Individual Analyst Price Targets
Consensus: Avg $78.58 | Range $60–$110
| Analyst | Firm | Rating | PT | Upside |
|---|---|---|---|---|
| Kate McShane | Goldman Sachs | Strong Buy | $76 | +21.4% |
| Greg Melich | Evercore ISI Group | Hold | $75 | +19.8% |
| Chris Bottiglieri | BNP Paribas | Hold | $74 | +18.2% |
| Simeon Gutman | Morgan Stanley | Hold | $72 | +15.0% |
| Steven Zaccone | Citigroup | Hold | $69 | +10.2% |
(d) Earnings Surprise History
| Quarter | EPS Act vs Est | EPS Beat/Miss | Rev Act vs Est | Rev Beat/Miss | Guidance |
|---|---|---|---|---|---|
| Q4 FY2026 (Jan 2026) | $2.58 vs $2.40 | +$0.18 ✅ | $13.6B vs $13.3B | +$0.3B ✅ | FY2027 revenue $41.4-42.5B guided |
| Q3 FY2026 (Nov 2025) | $1.26 vs $1.18 | +$0.08 ✅ | $9.4B vs $9.3B | +$0.1B ✅ | N/A |
| Q2 FY2026 (Aug 2025) | $1.34 vs $1.22 | +$0.12 ✅ | $9.5B vs $9.3B | +$0.1B ✅ | N/A |
| Q1 FY2026 (May 2025) | $1.09 vs $1.02 | +$0.07 ✅ | $8.9B vs $8.8B | +$0.1B ✅ | N/A |
(e) Confidence Band Commentary
BBY is covered by 19-27 analysts with a wide PT range ($60-$110) reflecting genuine uncertainty about the magnitude and timing of the AI device refresh cycle. The consensus has been marked down significantly over 2022-2025 as revenue contracted; FY2027 EPS estimates imply a large jump (+33%) that assumes meaningful recovery. BBY consistently beats quarterly EPS estimates by ~$0.10-0.15 as management manages margins carefully. The wide analyst range reflects the binary nature of the thesis: refresh cycle materializes (bull) vs. structural decline continues (bear).
💡 Investment Thesis
- AI device refresh cycle is a real catalyst: AI PCs, next-gen TVs, and smart home devices driven by GenAI integration represent a genuine demand catalyst. Best Buy estimates 50-60% of its US PC installed base is over 4 years old — AI PC upgrade potential is significant in 2025-2027.
- 6.1% dividend yield provides income while you wait: At $62.62, BBY offers a 6.1% yield — among the highest in consumer discretionary. 21 consecutive years of dividend growth with a sustainable 76% payout ratio (declining as EPS recovers toward $6.50+).
- Geek Squad services is the structural moat: In-home installation, repair, and tech support cannot be easily replicated by Amazon. Services revenue grows at above-retail rates and carries significantly higher margins than hardware sales.
- Significant discount to fair value: Analyst consensus Buy at $78.58 PT (+25% upside); DCF Base IV ~$72-80 suggests the stock is undervalued if any volume recovery materializes. 9.3× FY2027E EPS appears cheap for a durable franchise.
- Capital return story: $3.84/yr dividend + ~2% buyback yield = ~8.2% total shareholder yield at current prices. Management has been disciplined on capital return even through the revenue decline, signaling confidence in cash generation durability.
⚖️ DCF Verdict: Accumulate — Best Buy Co., Inc. (BBY)
Current price: $62.62 | Analyst Avg PT: $78.58
$55
🔴 Bear
$85
📊 Base
$115
🚀 Bull
| Tier | Price | Action |
|---|---|---|
| Tier 1 — Starter | ≤$78 | Begin position |
| Tier 2 — Add | ≤$70 | Add on weakness |
| Tier 3 — Full | ≤$58 | Full allocation |
| Sell Alert | ≥$98 | Above fair value — consider trimming |
How tiers are set: Tier 1 = Base IV × 0.92 (8% discount to base case). Tier 2 = midpoint of Bear & Base IV (building on meaningful weakness). Tier 3 = Bear IV × 1.05 (just above worst-case — maximum margin of safety). Sell alert = Bull IV × 0.85 (15% discount to bull case — above fair value range).
Accumulate below $65 with a Base DCF target of $75. At $62.62, BBY offers a compelling 6.1% yield plus meaningful upside to intrinsic value if the AI device refresh cycle materializes. The combination of income (6%+) and capital appreciation potential (25%+ to PT) makes this one of the more attractive risk/reward setups in consumer discretionary.
The bear case is real — structural competitive pressure from Amazon and margin compression from potential tariff impacts on consumer electronics (heavy China sourcing) could persist. Position size should reflect the retail sector risk; this is not a defensive holding. Stop-loss on a dividend cut, which becomes a risk if FCF falls below $800M.
🔧 Model Notes & Calibration
| Assumption | Rationale / Notes |
|---|---|
| Model Selection | DCF (FCFF @ WACC) chosen for BBY — retailer with thin but positive FCF. DDM would give similar results given 76% payout ratio, but DCF on FCF allows better modeling of the recovery scenario. |
| WACC Build | Ke = 4.30% + 1.20×5.5% = 10.90%. Kd = 4.5% pre-tax × (1-24%) = 3.42%. We=76.2%, Wd=23.8%. WACC = 0.762×10.90% + 0.238×3.42% = 9.12%. |
| FCF Base | $1.258B FY2026 FCF (3.0% FCF margin). Note FY2025 FCF was $1.39B despite lower revenue — reflects working capital improvement. Using $1.258B as conservative starting point. |
| Net Debt | $4.13B total debt (including $2.96B leases) minus $1.74B cash = $2.40B net debt. Lease-heavy retail balance sheet is typical. |
| Sanity Check | Target Base IV within ±20% of analyst avg PT $78.58. |
Bore Family Office • Analysis generated by Lurch • Not investment advice.