Don't give up on Best Buy just yet: Analysts

Shares of Best Buy tumbled more than 10 percent Thursday, after the electronics retailer reported holiday sales results that missed Wall Street's expectations and lowered its forecast for fourth-quarter revenue.

But analysts said the stock's dip to $26 represents a buying opportunity for investors, as its long-term recovery remains in tact. What's more, although Best Buy's U.S. holiday sales declined 0.8 percent, they easily outperformed broader industry trends reported by The NPD Group, implying the retailer gained market share during the period.

A customer uses her mobile phone as she shops at a Best Buy in Skokie, Ill.
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A customer uses her mobile phone as she shops at a Best Buy in Skokie, Ill.

According to the consumer data firm, overall sales of TVs, desktop and notebook computers, tablets and other categories dropped 4.8 percent over the same time frame.

"While Best Buy's holiday sales were worse than we expected, we were not entirely surprised given widespread reports of disappointing iPhone 6S sales," said Anthony Chukumba, an analyst at BB&T Capital Markets.

Indeed, weak mobile phone sales were a big contributor to Best Buy's revenue miss. Excluding this category, which combined with computing, logged a 7.2 percent decline, domestic revenue increased. Computing and mobile phones account for 44 percent of the company's revenue.

Analysts also commended Best Buy for exercising control over promotions and expenses, which contributed to the retailer upping its operating margin forecast for the fourth quarter. The electronics chain also continued to increase its U.S. online sales by double digits, bumping its penetration to 16.7 percent of its domestic revenue.

Best Buy has been reinventing itself under the leadership of CEO Hubert Joly, who has instilled a culture of cost savings and providing shoppers with expertise and experiences that cannot be replicated online.

Still, it's facing intense competition from Amazon, which continues to undercut retailers on price. Neil Saunders, CEO of retail research firm Conlumino, nodded to the fact that Amazon pushed its own lineup of tablets during the holiday period, offering deep discounts on these products.

Over the past year, Best Buy shares are down roughly 33 percent.

"We think the stock will trade lower on the [comparable sales] miss but believe this presents an even better buying opportunity for one of the cheapest stocks in hardlines that we expect to compete well in 2016," Citi analyst Kate McShane told investors.