Best Buy's Monster Stock Run of 2016 Faces Hurdles as Holidays Loom

Best Buy's (BBY) stock has notched an astounding 28% gain since the summer months, but the path toward further stellar gains may not be as easy.

Shares of the electronics retailer have soared since Aug. 22, the day before the company defied its Wall Street critics by blowing away second quarter sales and earnings estimates. That surprising outcome -- which sent the stock booming some 19.5% on Aug. 23 -- was fueled by a solid quarter of sales by Best Buy online and within categories such as appliances, consumer electronics and mobile phones. As icing on the cake, Best Buy reiterated its full year sales outlook and raised its operating income estimate to low-single digit growth from flat.

Meanwhile, CEO Hubert Joly -- who unfortunately for his bank account sold $12.8 million of the shares ahead of the report -- struck an upbeat note on the retailer's prospects for the balance of 2016. Joly sold when the stock was at about $32.24; today it's at $40.45.

Now, however, Best Buy enters its third quarter earnings release on Thursday in an interesting state. For starters, Best Buy's stock is valued more aggressively in light of its healthy year-to-date performance. As a result, Wall Street may not be in too much of a hurry to send the stock significantly higher, especially in front of the ultra-competitive holiday season, even if the company trounces earnings estimates again. Best Buy's stock currently trades on a forward price-to-earnings multiple of about 13 times, above the five-year median of roughly 12 times, according to data from BTIG.

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