Note: Best Buy’s FY’25 ended on February 1, 2025
Question: How would you respond if you owned Best Buy’s stock (NYSE: BBY) and its price decreased by 50% or more in the months ahead? While this may seem drastic, such a scenario has occurred in the past and could certainly happen again. The electronics retailer’s stock has already dropped 23% year-to-date, falling short of the S&P 500’s stagnant growth. In Q1 2026, the company announced a 2% decrease in net sales and a 5% decline in earnings per diluted share, attributing this to weakness in home theaters, appliances, and drones compared to the previous year.
Here’s the point: The main takeaway is that during a downturn, BBY stock could experience significant losses. Data from 2020 shows that BBY stock lost about 45% of its value within just a few quarters, while also enduring a peak-to-trough decline of around 55% during the inflation crisis of 2022, performing significantly worse than the S&P 500. This prompts the question: if similar challenges were to arise, could the stock undergo a major sell-off and potentially drop to $35 from its current price of $66? Of course, individual stocks are generally more volatile than diversified portfolios. As a result, if you seek growth with reduced volatility, you might want to explore the High Quality portfolio, which has outperformed the S&P 500 and achieved returns exceeding 91% since its inception.
Why is it relevant now?
In response to increased tariff-related costs, Best Buy has implemented selective price increases effective mid-May 2025. Best Buy’s heavy reliance on imported electronics makes it particularly vulnerable to tariff fluctuations. Approximately 30–35% of its merchandise is sourced from China, while about 25% comes from the U.S. or Mexico, which are exempt from certain tariffs due to domestic production or trade agreements. The remaining 40% originates from countries like Vietnam, India, South Korea, and Taiwan, which are subject to a 10% tariff. The U.S. currently imposes tariffs of up to 30% on imports from China.
Notably, around 97% of Best Buy’s products are imported by vendors rather than directly by the company. To mitigate tariff impacts, Best Buy has encouraged its vendors to diversify manufacturing locations, negotiate lower costs, and adjust the product mix.
How resilient is BBY stock during a downturn?
BBY stock has performed worse than the benchmark S&P 500 index during several recent downturns. While investors remain hopeful for a soft landing for the U.S. economy, how severe could the situation become if another recession occurs? Our dashboard How Low Can Stocks Go During A Market Crash shows how leading stocks performed during and after the last six market crashes.
Inflation Shock (2022)
• BBY stock decreased 54.5% from a peak of $138.00 on November 22, 2021, to $62.85 on October 20, 2022, compared to a peak-to-trough decline of 25.4% for the S&P 500
• The stock is still yet to recover to its pre-Crisis high
• The highest price the stock has reached since is $103.30 on September 30, 2024, and it now trades at approximately $66
Covid Pandemic (2020)
• BBY stock fell 44.9% from a high of $91.93 on February 20, 2020, to $50.69 on March 23, 2020, compared to a peak-to-trough decline of 33.9% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by July 22, 2020
Valuation
At its current price of roughly $66 per share, BBY is trading at about a forward P/E ratio of 11x the consensus 2026 earnings estimate—slightly below its four-year average P/E ratio of 12x. Analysts have set an average 12-month price target of $81, reflecting a potential upside of over 20% from current prices. See our analysis on Best Buy’s Valuation for additional insights into what is influencing our price estimate for the stock.
Despite this appealing valuation, Best Buy has adjusted its fiscal 2026 guidance downward, now forecasting revenue in the range of $41.1 billion to $41.9 billion, from the earlier range of $41.4 billion to $42.2 billion. Adjusted earnings per share are expected to be between $6.15 and $6.30, lower than the prior estimates of $6.20 to $6.60. The company expects ongoing cautious consumer behavior amid persistent inflation, leading to restrained discretionary spending, especially on high-ticket products. Consensus forecasts indicate flat revenue growth in fiscal 2026, with a modest 2% increase projected for fiscal 2027, reflecting tempered expectations amidst persistent macroeconomic and operational obstacles.
Considering this possible slowdown in growth and the greater economic uncertainties, ask yourself the question: Do you plan to hold your BBY stock now, or will you panic and sell if it starts to fall to $40, $30, or even lower? Holding onto a declining stock is never easy. Trefis partners with Empirical Asset Management—a wealth manager based in Boston—whose asset allocation strategies yielded positive returns during the 2008-09 period when the S&P fell more than 40%. Empirical has integrated the Trefis HQ Portfolio into its asset allocation framework to offer clients better returns and less risk compared to the benchmark index—a smoother experience, as demonstrated in HQ Portfolio performance metrics.
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