JPMorgan has shifted its recommendation on Best Buy down to Neutral from Overweight, assigning a $76 price target and arguing that gains driven by tax-related stimulus are unlikely to persist beyond the near term.
The bank expects a short-term uptick in consumer spending connected to tax stimulus, but it cautioned that several 2026-specific items could keep the stock trading in a narrow range rather than underpin sustained growth. Among the factors JPMorgan highlighted are the planned launch of Nintendo’s Switch 2 in the second quarter and the October expiration of support for Windows 10 - events the bank believes may have pulled some demand forward instead of creating durable incremental sales.
Category exposure and component-cost risk
JPMorgan noted that computing represents more than 35% of Best Buy’s sales, making it a critical area of sensitivity. The bank flagged abnormal conditions in the memory market, where prices are expected to double, and said those higher component costs are likely to weigh on computing demand. While computing has historically been one of the retailer’s steadier categories, JPMorgan warned that rising component costs could damp replacement activity.
The firm also pointed to ongoing weakness in televisions and subdued trends in appliances. TVs account for more than 20% of Best Buy’s sales, while appliances represent roughly 11% of the mix. JPMorgan linked the muted appliance performance in part to a slow housing market.
Downshift in near-term guidance
On the fourth-quarter outlook, JPMorgan reduced its expectations and now models comparable sales down 3%, versus the Street’s projection for modest growth. The bank said December sales did not bounce back as it had anticipated, attributing the shortfall to persistent consumer uncertainty, concerns around tariffs and the labor market, and the potential that demand was pulled into earlier quarters.
For the quarter JPMorgan is modeling a gross margin of 21.0%, an operating margin of 4.9% and earnings of $2.40 per share - figures the bank said sit below consensus estimates.
Outlook and market dynamics
Looking past the immediate stimulus effect, JPMorgan expressed limited confidence in a sustained recovery. The bank pointed to tougher year-over-year comparisons in categories that have so far outperformed and to constrained support from housing fundamentals. While heavy short interest in the stock and the timing of tax-related cash could trigger a short-lived rally, JPMorgan said it expects selling pressure to re-emerge at higher price levels and to keep upside constrained.
The bank’s analysis underscores a mix of product-cycle timing, component-cost headwinds and category-specific softness that, in JPMorgan’s view, make a longer-lasting turnaround unlikely without broader improvements in the consumer and housing environments.