The Best Buy story

What drives the business

• Best Buy combines stores, online shopping and home services across the US and Canada, with 1,068 stores at the end of fiscal 2026 and offerings including Geek Squad, memberships, installation and repair.
• Its Domestic segment includes US operations and its health business, while International covers Canada, with revenue of $9.07 billion and $709 million, respectively, in the quarter to August 2026.
• Computing and mobile phones accounted for 46% of domestic revenue in the quarter to August 2026, making demand for these products a major influence on the business.
• Domestic online revenue was $3.00 billion, or 33.1% of domestic revenue, in the quarter to August 2026, supported by store pickup and shipping from stores.
• Marketplace commissions and advertising add service revenue alongside merchandise, and their growth helped lift domestic gross profit rate to 24.0% from 23.4% in the comparable prior period.

What the price assumes

At $89.91, the reverse DCF implies free cash flow after stock pay grows at -1.3% annually for ten years using a 10.2% discount rate.

That compares with delivered growth of 2.2% annually over the last 10 years and the TenQ check's 3.1% bar, which moves the historical rate halfway toward 4%.

The implied growth rate is below that bar, but the 9.4% free cash flow yield is also below the company's historical 11.0%, failing the separate historical cash yield check.

Value BBY on your own assumptions

What could change the story

• Apple, Samsung, HP, LG and Sony represented approximately 55% of merchandise purchased in fiscal 2026, and vendors generally have no long-term written contracts requiring continued supply or securing key terms.
• The margin improvement in the quarter to August 2026 included approximately $34 million of tariff refunds, while domestic adjusted administrative and operating expenses rose to 19.6% of revenue from 19.3% in the comparable prior period.
• Reported earnings comparisons also benefited from a $6 million reduction to restructuring charges in the quarter to August 2026, versus $114 million of charges in the comparable prior period.
• Revenue growth of 1.4% over the last twelve months followed annual growth of -3.4% over the last three years, with both measures failing TenQ's peer growth checks.
• The near-term liquidity ratio of 1.12 falls below TenQ's 1.50 bar, and inventory funding needs typically rise before the holiday season, when the company generates a large proportion of revenue and earnings.

What to watch next

• For the third quarter of fiscal 27, management expects comparable sales growth of 1.0% to 3.0% and an adjusted operating income rate of 4.1% to 4.2%.
• Raised fiscal 27 guidance calls for revenue of $42.3 billion to $42.8 billion, comparable sales growth of 1.9% to 3.0% and adjusted diluted EPS of $6.70 to $6.90.
• Domestic product margins, Marketplace and advertising contributions, and related expenses will show whether margin improvement extends beyond tariff refunds.
• Cash generation and inventory funding will provide context for approximately $750 million of planned fiscal 27 capital expenditures and approximately $300 million of expected share repurchases.

Sources

• Best Buy's earnings release, filed with the SEC
• Its latest 10-Q or 10-K, for the risk factors
• The BBY stock report, for every figure and check