Best Buy Co., Inc. (BBY  ) is entering a stretch where short-term trading upside may be easier to find than durable gains, according to JP Morgan analyst Christopher Horvers, who sees tax stimulus and short covering as potential near-term supports but believes "sellers higher," tougher comparisons from lapping the Switch 2 launch and Windows 10 replacement cycle, and lower forward earnings expectations will likely cap sustained upside. Valuation Reset After Downgrade

Reflecting that view, Horvers downgraded Best Buy to Neutral from Overweight and cut his December 2026 price forecast to $76 from $99. The revised target is based on roughly 12x fiscal 2026 earnings and about 5.5x EV/EBITDA, which he believes fairly reflects a retailer facing slowing comps and limited visibility on a longer-term recovery.

Horvers also reduced his earnings outlook. He cut adjusted EPS estimates to $6.23 from $6.45 for fiscal 2025 and $6.36 from $7.09 for fiscal 2026, citing a tougher fourth-quarter setup and fading category tailwinds. For the fourth quarter of fiscal 2025, he now models -3% comparable sales, 21.0% gross margin, 4.9% operating margin, and EPS of $2.40, below Street expectations, as consumer electronics demand remained softer than anticipated late in the year.

Guidance Risk Looms for Fiscal 2026

Looking ahead, Horvers sees guidance risk as a key near-term overhang. He expects management to guide fiscal 2026 comps between -1% and +1% and EPS of $6.10-$6.60, below the current consensus, which could prompt further estimate cuts. He also expects growth to slow as Best Buy laps the Switch 2 launch and the Windows 10 replacement cycle, which together drove a significant share of 2025's comp growth. In his view, more than 40% of the mix that supported last year's momentum is set to decelerate.

Horvers is particularly cautious on computing, which accounts for more than 35% of sales, as rising memory costs could lift PC prices by 20-30% and pressure unit demand into 2026. He sees limited margin upside, with benefits from ads, marketplace growth, and supply-chain efficiencies largely offset by tariffs and constrained SG&A leverage, keeping operating margins roughly flat near 4.2%.

Competitive and Category Challenges Persist

On competition, Horvers notes a narrowing price-performance gap between value and premium electronics brands, which could pressure ticket size and mix even if unit volumes stabilize. TVs and appliances remain challenged as well, with slow housing turnover limiting recovery.

BBY Price Action: Best Buy shares were up 0.32% at $65.31 at the time of publication on Monday, according to Benzinga Pro data.