AI-enabled PCs could act as a positive catalyst for Best Buy (NYSE:BBY) stock in the second half of 2024, analysts at D.A. Davidson said in a note.
Although BBY shares have lagged behind the S&P 500 year-to-date, the stock has been showing signs of recovery, including a 15% rebound since reporting first-quarter 2024 results at the end of May.
This rebound makes it the best performer among the 14 Retailing and Broadlines & Hardlines stocks covered by D.A. Davidson since that time, the firm’s analysts noted.
“We think that recovery is supported by improving industry data, primarily related to rebounding PC demand, a trend that we think should accelerate with the launch of a new AI driven product line up at Best Buy,” analysts wrote.
PC demand has rebounded recently, with the industry data showing the first year-over-year increase in global PC shipments in the fourth quarter of 2023 since the third quarter of 2021. This growth accelerated in the first quarter of 2024 with a 1.5% increase, D.A. Davidson highlighted.
Analysts noted a strong correlation between this data and Best Buy’s comparable sales, particularly in their computing segment, which accounts for 42% of total sales – with approximately 70% of that, or roughly 30% of total sales, in computing.
In the first quarter of 2024, Best Buy’s comparable sales in “computing & mobile” were down 2.2% domestically, marking the best performance since the third quarter of 2021.
“We believe the biggest reason for the rebound in PC data over the last six months is simply the nature of product cycles, which is typically about 4 years for these products,” analysts continued.
“Thus, with many consumers purchasing new PCs and laptops during the early days of the COVID-19 related lockdowns and social distancing period, those products are now at replacement age.”
Looking ahead to the rest of the year, D.A. Davidson analysts believe the improvement in PC demand for Best Buy will continue. The company recently unveiled a lineup of AI-enabled products, launching in stores in mid-June, which also includes 40 new Microsoft Copilot-enabled SKUs across various hardware brands, with 40% of these being exclusive to Best Buy.