Best Buy Co., Inc. BBY is strengthening its retail model by expanding the advertising and Marketplace businesses. Best Buy Ads draws on customer reach and insights, while Marketplace broadens product selection and attracts new sellers. Together, these initiatives create additional profit streams, support investments in customer experience and reinforce the company’s position as an omnichannel technology retailer.
Best Buy Ads collections are on track to grow 10% in fiscal 2027, building on $900 million last year. This momentum supports management’s strategy to advance Best Buy as a retail media, advertising and technology company. Its customer relationships and growing reach provide a foundation for connecting brands and advertising partners with shoppers.
Marketplace is delivering stronger-than-anticipated results. Domestic gross merchandise value reached approximately $300 million in the second quarter, prompting management to raise its full-year forecast to $1.3 billion. Customer ratings and return rates are in line with the first-party business. Plans to add international sellers create another expansion opportunity, opening the platform beyond sellers with a U.S. physical presence.
These businesses are contributing to margin improvement. Domestic gross profit rate rose 60 basis points year over year to 24%, with Ads and Marketplace growth among the key drivers, alongside approximately $34 million in tariff refunds. Management expects annual gross profit rate expansion of 30-40 basis points, primarily supported by continued growth in both initiatives.
The stronger Marketplace outlook has also slightly improved management’s expectations for the combined operating income contribution from Ads and Marketplace. Alongside broader business momentum, Best Buy raised its fiscal 2027 adjusted operating income rate guidance to 4.4-4.5%. Expanding seller participation, sustained advertising growth and a wider assortment position these businesses to become increasingly meaningful profit contributors while supporting investment in the core retail experience.
BBY’s Price Performance, Valuation & Estimates
Over the past six months, Best Buy stock has risen 31% as compared with the industry’s 29.6% growth.
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From a valuation standpoint, BBY trades at a trailing price-to-sales ratio of 0.43, slightly above the industry’s average of 0.42. It has a Value Score of A.
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The Zacks Consensus Estimate for Best Buy’s current and next financial years’ earnings implies year-over-year growth of 6.1% and 7%, respectively. Earnings estimates for fiscal 2027 and 2028 have been revised upward by 3 cents and remained unchanged, respectively, over the past 30 days.
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BBY’s Zacks Rank & Other Key Picks
Best Buy currently carries a Zacks Rank #2 (Buy).
We have highlighted three other top-ranked stocks in the retail space, namely Ross Stores Inc. ROST, Target Corporation TGT and Dollar Tree DLTR.
Ross Stores operates as an off-price retailer of apparel and home accessories. The company also holds a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Ross Stores’ current fiscal-year earnings and sales indicates growth of 32.7% and 12.8%, respectively, from the year-ago actuals. ROST delivered a trailing four-quarter average earnings surprise of 11.2%.
Target Corporation offers guests fashionable, differentiated merchandise and everyday essentials at discounted prices. It currently carries a Zacks Rank #2.
The Zacks Consensus Estimate for Target’s current fiscal-year earnings and sales implies growth of 37.8% and 5.1%, respectively, from the year-ago actuals. TGT delivered a trailing four-quarter average earnings surprise of 10.5%.
Dollar Tree is an operator of discount variety stores offering a broad assortment of everyday consumables and discretionary merchandise. The company also has a Zacks Rank #2 at present.
The Zacks Consensus Estimate for Dollar Tree's current fiscal-year earnings and sales indicates growth of 36.4% and 6.6%, respectively, from the year-ago actuals. DLTR delivered a trailing four-quarter average earnings surprise of 12.2%.
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Best Buy Co., Inc. (BBY): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).