Why Best Buy Co. Inc. Stock Plunged Today

What happened

Shares of Best Buy Co. Inc. (NYSE: BBY) were down 8% as of 1:15 p.m. EDT Tuesday, after the electronics retailer detailed long-term financial targets that were mixed relative to the market's expectations.

More specifically, at its investor day today, Best Buy reiterated plans to drive $600 million in annualized cost savings between now and the end of fiscal 2021, which would be incremental to the $1.4 billion in savings it already generated over the past five years. In addition, Best Buy aims to deliver fiscal 2021 enterprise revenue of $43 billion (up from $39.4 billion in fiscal 2017), adjusted operating income of $1.9 billion to $2.0 billion (up from $1.7 billion in fiscal 2017), and adjusted earnings per diluted share of $4.75 to $5.00 (good for 8% to 9% compound annual growth from fiscal 2017).

For perspective, analysts' consensus estimates were modeling fiscal 2021 adjusted earnings per share near the high end of that range, albeit on lower annual revenue of $40.73 billion.

So what

To be fair, Best Buy reiterated its belief that the company "is operating in an opportunity-rich environment, driven by innovation and customers' need for help." Among its most promising incremental growth opportunities, according to Best Buy's filings with the U.S. Securities and Exchange Commission, are building a leading position in the smart-home market, the pilot of its new Assured Living service to allow adult children to check on the health and safety of aging parents, and the ongoing launch of its Geek Squad Total Tech Support offering.

In addition, Best Buy will aim to further improve its customer experience to focus on customer needs in underpenetrated channels, including its recently expanded In-Home Advisor program.

Now what

That's all well and good, though it's also hard to blame the market for its initial negative reaction to Best Buy's disappointing long-term profitability targets. Of course, Best Buy could certainly be taking a conservative approach to its model. But until the fruits of its efforts become more clear, it's no surprise to see shares pulling back.

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