UPDATE: Morgan Stanley Starts Best Buy (BBY) at Overweight

(Updated - June 24, 2014 11:53 AM EDT)

Morgan Stanley initiated coverage on Best Buy (NYSE: BBY) with an Overweight rating and a price target of $36.00. Analyst analyst Simeon Gutman believes the "payback period" for its transformation is just getting started.

"In BBY, we see a transformed business with significant operating leverage poised for improving top line growth. Our market share analysis, located within, shows that BBY is rapidly recapturing share in both the physical and digital channels," said Gutman. "With the ~$800M of realized Renew Blue savings and more to come, we believe BBY's EBIT margin may approach 5% by 2017, producing EPS power of around $3.75, nearly 80% growth from 2013. Our reverse logistics analysis points to as much as $0.73 in EPS accretion."

"Our $3.75 2017 earnings scenario assumes that comps grow in the low-single digit range. We believe that 4K TVs and ongoing smartphone launches will create a steady product cycle undercurrent over the next 5 years," he added. "At the core of our proprietary analysis is that BBY's total offering to the customer is now segment-leading, with competitive pricing (even before price match), excellent customer service, a robust rewards program, and easy-to-use website and mobile apps. Our AlphaWise pricing study time series reveals that BBY's pricing has never been more competitive with Amazon."

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 $28.57 yesterday.

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