Best Buy Reports Earnings After an All-Time High

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Consumer durables retailer Best Buy Co., Inc. (BBY) releases its quarterly results before the opening bell on Thursday, May 24, and has a favorable track record when it comes to earnings. The retailer of refrigerators and televisions down in size to handheld devices and accessories has seen positive reactions to earnings for almost five years in a row. The stock closed Tuesday, May 22, at $75.47, up 10.2% year to date and up 16% from its Feb. 6 low of $65.05. The stock set its all-time intraday high of $79.89 on May 16 and has slipped by 5.5% since then.  

Analysts expect Best Buy to post earnings per share of 74 cents to 80 cents when it reports results on Thursday. The company has reported better-than-expected results for the four trailing quarters. The durable goods retailer is expected to beat estimates yet again, but the question is whether positive results are priced in. One concern is that expanded online sales may have crimped margins and reduced foot traffic. A positive is that Best Buy has announced a $200-per-year service for unlimited Geek Squad support for all products in the home, regardless of when they were bought and who they were bought from. (See also: Is Best Buy Amazon-Proof?)

The daily chart for Best Buy

Daily technical chart showing the performance of Best Buy Co., Inc. (BBY) stockCourtesy of MetaStock Xenith

Best Buy has been above a “golden cross” since Aug. 3, 2016, when the stock closed at $33.41. This bullish chart signal is not shown on this chart, as it was before the past 52 weeks. A “golden cross” occurs when the 50-day simple moving average moves above the 200-day simple moving average, indicating that higher prices lie ahead. A test of the 200-day simple moving average provided a buying opportunity on Nov. 16, when the average was $53.47. The upper horizontal line at $74.97 is my second quarter pivot, which has been a magnet since April 18.

[Check out Chapter 2 of the Technical Analysis course on the Investopedia Academy to learn about using moving averages to develop your trading strategy.]

The weekly chart for Best Buy

Weekly technical chart showing the performance of Best Buy Co., Inc. (BBY) stockCourtesy of MetaStock Xenith

The weekly chart for Best Buy is positive, with the stock above its five-week modified moving average of $74.94 and well above its 200-week simple moving average at $43.54, which is the “reversion to the mean,” last tested during the week of July 1, 2016, when the average was $29.52. The 12 x 3 x 3 weekly slow stochastic reading is projected to rise to 78.92 this week, up from 76.76 on May 18.

Given these charts and analysis, investors should purchase Best Buy shares on weakness to my quarterly pivot at $74.97 and reduce holdings on strength to my monthly risky level at $81.20. (For more, see: 4 Overvalued Consumer Stocks That May Fall by 10%.)

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