Why Best Buy Stock Was Upgraded by Oppenheimer



Oppenheimer upgrades to “outperform”

On March 22, Oppenheimer upgraded Best Buy (BBY) stock to “outperform” from “perform” and set its price target at $86. Best Buy’s transformation from a traditional brick-and-mortar retailer to a strong omnichannel player, its improved top line, and earnings growth prospects were behind the upgrade.

On March 20, Evercore ISI initiated coverage of Best Buy with an “in-line” rating and a price target of $75. Best Buy’s fiscal 2019 fourth-quarter results[1.ended February 2] were better than expected and its outlook for fiscal 2020 was strong, boosting its stock by 14.1% on February 27. As of March 22, Best Buy stock had risen 32.4% this year, surpassing specialty retailers GameStop (GME) and Aaron’s (AAN), which had returned -17.2% and 19.3%, respectively. Best Buy stock was also ahead of the S&P 500, which had risen 11.7%.

The company’s operating performance in fiscal 2019 and positive forecast led to many analysts raising their price target for Best Buy on February 28:

  • Jefferies raised it to $72 from $70.
  • Telsey Advisory Group raised it to $74 from $67.
  • Credit Suisse raised it to $78 from $70.
  • Morgan Stanley raised it to $77 from $65.
  • UBS raised it to $72 from $57.

Analysts’ recommendations

As of March 22, analysts’ average 12-month price target for Best Buy stock was $76.97, implying a ~10% upside. Of the 26 analysts covering the stock, seven recommend “buy,” 18 recommend “hold,” and one recommends “sell.”

Best Buy has survived a very challenging consumer electronics retail environment. It has closed unprofitable stores and is focusing on growth categories such as smart home technology.

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