CNBC Stock Blog

7 Reasons to Buy Best Buy: Analyst

Is Best Buy a Good Buy?

Investment bank Jefferies on Wednesday upgraded big box retailer Best Buy to "buy" from "hold" with a price target of $24, giving seven reasons why the company's turnaround should lure investors.

Jefferies based its upgrade on the expectation that new management will "cut costs, bring better processes, discipline and measurement to the business, essentially fix what it has and stabilize the business."

Daniel Binder, the analyst responsible for the research, was on CNBC's "Squawk on the Street" to explain the rating. "The number one reason is the change in management," Binder said, "You've got a management team that has a greater expertise in turnarounds and growing businesses both on land and on-line, and that's what I think will be key for Best Buy over the next two-three years."

Binder said the company has experienced "numerous challenges," such as bad execution and bad product mix, but the new team demonstrated over the holiday season that it can exceed expectations on key metrics. "I think there's a lot more coming," he said.

Binder expects the company to engage in up-front investment spending, bringing its IT services in house, bolstering its online presence, and creating cost savings—estimated to be $725 million—70 percent of which Jeffries expects to be reinvested into the business.

Here are the seven reasons Jefferies lists as reasons to purchase Best Buy stock now:

1. New capable management with expertise in turnarounds and growth businesses on land and online.

2. Clear cost-cutting opportunities and an evolving plan to go after them.

3. Strong upside to EPS as we look to Q4 and beyond.

4. Expectations have been set low for 1H on heavy investment spending, giving management more flexibility.

5. Big investments are being made to improve the multichannel experience, which should result in share gains.

6. Potential sale of Europe and China operations could fetch $600-900 million in our estimation or 10-15% of BBY's market capitalization.

7. Shifting investor sentiment could lead to multiple expansion as management shows early signs of success. Opportunities could include a double in stock price over a few years if management's plan is well executed.

— By CNBC's Paul Toscano. Follow him on Twitter and get the latest stories from "Squawk on the Street" @ToscanoPaul