Best Buy: Wall Street's Changing Opinion

Shoppers move through a Best Buy store.
Getty Images
Shoppers move through a Best Buy store.

Best Buy shares are up nearly 47 percent so far this year, making the stock the second best performer in the S&P 500 behind Netflix shares' 110-percent gain, but analyst upgrades Tuesday suggest the stock may have even more room to run.

It's an impressive move for the electronics retailer who has been fighting an uphill battle against and savvy shoppers who take advantage of smartphones and the price transparency of ecommerce offers to compare prices. A number of executives have come and gone at Best Buy who have tried to save the big box consumer electronics retailer from following the fate of its former rival Circuit City. But the current management team received rave reviews from Wall Street Tuesday.

Stifel, Nicolaus & Company upgraded Best Buy shares to buy from hold with a price target of $23. In a note to investors, Stifel analyst David Schick said, "this is first and foremost a management upgrade call" detailing CEO Hubert Joly, CFO Sharon McCollam and the entire management team's willingness to make tough choices.

When rival Circuit City went bankrupt, Best Buy enjoyed market share gains by default, but it didn't work on operational improvements, and left all those tough decisions to be made now that could have been more easily accomplished before.

One tough decision was Best Buy's choice to begin matching the prices of all local retail competitors and 19 major online rivals on March 3, in a move the retailer hopes will signal "the end of showrooming."

The program was first advertised for the holiday season, though consumers have said anecdotally, some Best Buy managers would honor competitors' online prices even before the holiday season, the key was to ask. Asking will still be the key to unlock the price-matching magic, so consumers need to do their homework.

Target was the first major retailer to extend its holiday program for online-price matching to a year-round offering. Like Best Buy, consumers will need to do the legwork, by providing a dated, print-out of the competitors' product and price.

But beyond the research, the tough part for those hoping to price-match at any retailer may still be finding a product that is fully identical. For example Procter & Gamble sells Pampers diapers at Target, Wal-Mart and Amazon, but in a variety of types and quantities. In order for a retailer to honor a price, the product has to be identical.

The price matching program is just one example of the work management is doing to improve the store's performance.

And there is more to the story. Although former CEO and Chairman Richard Schulze has not been able to take the company he founded private, there are reports he is still trying to secure private-equity funding before the deal window closes on Feb. 28.

Schick said he expects Schulze's and Joly's relationship has improved and expects that because Joly has managed a large private company before, he is likely to be indifferent to whether Best Buy is public or private.

Separately, Barclay's Alan Rifkin upgraded his recommendation for Best Buy shares to overweight from equal weight, raising the price target to $20 from $13 and increasing 2014 earnings estimates to reflect estimated cost savings. The note to investors cites nine reasons for the increases, including "changes to the management team as clear positives." Additionally, Rifkin notes whether Schulze buys Best Buy entirely or takes a minority stake, the anticipation of either provides support to shares.