Jefferies Upgrades Best Buy (BBY) to Buy; Cites Seven Reasons to Own

March 6, 2013 6:57 AM EST
Get Alerts BBY Hot Sheet
Price: $44.78 +2.17%

Rating Summary:
    7 Buy, 17 Hold, 5 Sell

Rating Trend: Down Down

Today's Overall Ratings:
    Up: 35 | Down: 31 | New: 9
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Jefferies upgraded Best Buy (NYSE: BBY) from Hold to Buy with a price target of $24.00 (from $13.00) citing an inflection point in the turnaround.

"Like other retail turnarounds we have seen, we are at the point in Best Buy’s turnaround story where we don't have all the information we would like to understand the reinvention of Best Buy, but nonetheless we sense an inflection point," analyst Daniel Binder said. "Ultimately this is a bet that new management will cut costs, bring better processes, discipline and measurement to the business, essentially fix what it has and stabilize the business."

The analyst gave seven reasons to own the stock:
1) New capable management with expertise in turnarounds and growth businesses both 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 of this year 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 multi-channel 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.

The firm raised r FY14 and FY15 EPS estimates to $2.35 and $2.85 from $1.67 and $1.11, respectively.

For an analyst ratings summary and ratings history on Best Buy click here. For more ratings news on Best Buy click here.

Shares of Best Buy closed at $18.40 yesterday.

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