Best Buy is ready for the AI revolution – and so are the investors. But what about the customers?

The shares of the US electronics retailer, which had risen by 13% on the day of the earnings announcement last week, have continued to increase and are up by 21% since the investor call. AI hype gripped the markets after Best Buy executives highlighted innovations in the latest laptops.

Best Buy reportedly holds about one-third of the US market in the computer retail sector, with laptops accounting for 20% to 25% of sales, according to a report by Citi Research. Citi upgraded the stock from a "Sell" rating with a target price of $67 to a "Buy" rating with a target price of $100, citing positive signs in laptop sales and the current innovation cycle.

Sure, here's the translated heading:

"Last week, Best Buy managers announced that the company has 40 new laptops in its range, 40% of which are exclusive to Best Buy. These laptops are made by Microsoft, Dell, HP, Lenovo, and Samsung and feature Microsoft's new Copilot+ system, which integrates AI functionalities. The products can be pre-ordered on the Best Buy website and will be available from June 18.

Sure, here is the translation of the heading to English:

Additional products that stir excitement include the latest iPads from Apple, equipped with powerful chips that enable AI, as well as the new open-ear headphones from Bose and the new headphones from Sonos, which go on sale on Wednesday. Best Buy hopes that these launches will motivate consumers to upgrade and increase the average purchase prices, particularly in the critical back-to-school season.

There are encouraging, but not outstanding early signs. Best Buy CEO Corie Barry said that the new iPads are selling well and contributing to improved sales trends in the current quarter. She said that pre-orders for the new Copilot+ laptops are "somewhat, but not massively" exceeding expectations.

It remains to be seen whether consumers suffering from inflation are willing to spend more than $1,000 on laptops whose features are also available online, such as summarizing long documents or real-time translation. The main advantage is that consumers can summarize or translate faster and more securely without their data being exposed in the cloud.

Best Buy may have been ready for an upgrade cycle anyway. The retailer experienced tremendous growth during the pandemic as wealthy, home-bound consumers upgraded their home office setups. However, this was followed by ten consecutive quarters of comparable sales declines in its core U.S. business. Domestic comparable sales were still down by 6.3% in the last quarter, which ended on May 4.

Consumers might finally start replacing their laptops: Comparable annual sales in this category have slightly increased in the last two quarters. If the new product launches attract at least more customer traffic to the stores, this could be good for Best Buy's overall business.

Can Best Buy fully capitalize on this AI product enthusiasm? Industry analysts note that Best Buy always receives an extra boost whenever there's an innovation cycle in computer technology.

Nevertheless, the retailer has lost market share in recent years. This could be partly due to consumers consolidating their purchases at large retailers like Costco or Walmart. However, it is also possible that the in-store shopping experience has deteriorated: Best Buy has cut almost a third of its workforce in the last four years. Another concern: The sales of household appliances have been very weak, and there is no clear path to recovery, as fewer people are moving and renovating their homes.

Here's the translation of the heading to English:

"After the recent increase, Best Buy shares are trading at approximately 0.45 times the expected 12-month sales, 18% more expensive than the average during the five-year period before the pandemic. That's a significant premium for an AI upgrade cycle that is not yet certain.