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Wall Street Bulls Line Up for Best Buy

Wednesday, 20 Mar 2013 | 12:54 PM ET
Another Bullish Call on Best Buy
Wednesday, 20 Mar 2013 | 10:40 AM ET
The big box story got an upgrade to "outperform", with Peter Keith, Piper Jaffray analyst.

It's turned into a stampede. Wall Street analysts are increasingly turning bullish on electronics retailer Best Buy on hopes the new management team can turn the business and the stock around.

"With the new management team coming in, we think there is a substantial upside opportunity over the next couple of years," Piper Jaffray analyst Peter Keith told CNBC. He has an "outperform" rating on the stock and a price target of $26—implying about 14 percent upside from recent levels. The stock has almost doubled already year-to-date.

Keith said the previous management team was very good at beating up on Circuit City and smaller consumer electronics retailers, but was "fairly insular."

The new management team, Keith said, can better operate Best Buy to compete against the likes of Amazon.com, cope with the changing product cycles, and build a viable e-commerce platform, he said.

"We think those are great long-term initiatives that could drive earnings and valuation for several years," Keith said, adding that the stock is the cheapest of the 19 retailers he covers.

Credit Suisse, meanwhile, on Wednesday reinstated coverage on Best Buy with an "outperform" rating and a $30 price target, writing in a note that outsized returns in retailing happen over time in two scenarios, "management change being the primary one and acquisitions the other."

"The story today is all about management," analyst Gary Balter wrote. The analyst added that the potential earnings upside is in the $4 per share range, "implying a potential double in the stock price over a multi-year period."

But Piper Jaffray's Keith warned of challenges in the first quarter that could make it look like the turnaround is not taking hold. He cited the Super Bowl TV sales shifting into the fiscal fourth quarter, investments, and a difficult gross margin comparison.

"The numbers for Q1 probably will not be terribly exciting," Keith said.

Keith noted that while sentiment has turned bullish, Best Buy is still not a consensus "buy" on Wall Street.

"If we look at the positioning of ratings today there are 24 analysts that cover Best Buy, we now have 10 equivalent 'buy' ratings," he said. "It is by no means a consensus 'buy' from the sell side."

—By CNBC's Justin Menza

Additional News: Best Buy Earnings, Revenue Top Estimates

Additional Views: 7 Reasons to Buy Best Buy

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Disclosures:

Piper Jaffray makes a market in Best Buy securities; Credit Suisse received investment banking related compensation from Best Buy within the past 12 months.

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