More Analysts Upgrade Best Buy, Credit Co. Leadership
More analysts have upgraded Best Buy Company, Inc.’s stock and, echoing the recent remarks of other analysts, are crediting Best Buy’s new leaders for helping the company achieve early signs of a turnaround.
Peter Keith, a retail analyst at Minneapolis-based Piper Jaffray, upgraded Richfield-based Best Buy’s stock to “overweight” from “neutral” on Monday, according to media reports. The overweight rating is the equivalent of some firms’ “buy” rating.
In a research note, Keith reportedly said that Piper Jaffray believes Best Buy’s new management team is “in the very early stages of a multi-year turnaround process.” Keith raised his price target for Best Buy’s stock from $16 to $26.
Keith’s remarks seem to represent a trend. Less than a week before Keith upgraded his rating, Jefferies analyst Daniel Binder reportedly raised Best Buy’s stock rating from “hold” to “buy.”
“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,” Binder said, according to a report by Fox Business.
Best Buy’s stock was trading down about 0.45 percent at $20.08 Monday afternoon, although it is up more than 20 percent since the company announced its fourth-quarter and full-year earnings results on March 1.
Revenue for the quarter that ended February 2 totaled $16.7 billion, essentially flat compared to last year’s fourth quarter. The company reported a net loss of $409 million, marking a substantial improvement from a net loss of $1.82 million for the same period a year ago. Quarterly sales and earnings beat analysts’ expectations.
For the full year, revenue slid less than 1 percent to $49.62 billion while the company’s loss narrowed from $1.32 billion to $249 million.
Aside from Keith and Binder, other analysts also recently lifted their ratings for Best Buy’s stock. One was David Schick, an analyst at St. Louis-based Stifel, Nicolaus & Company, who last month cited “vastly improved management” as a key factor in his upgrade, adding, “This is first and foremost a management upgrade call.”
During the past year, Best Buy has seen an exodus of leaders and significantly altered its executive roster. Former CEO Brian Dunn departed in the wake of a scandal and was replaced by Hubert Joly, an appointment that was initially met with skepticism but now seems to be receiving a more positive response.
Joly took the helm in September; then in November, former Williams-Sonoma Chief Financial Officer (CFO) Sharon McCollam became Best Buy’s CFO and chief administration officer. Some analysts have cited Joly and McCollam as the key players in helping to start transform the business.
The latest analyst upgrade for Best Buy’s stock comes about a week after founder Richard Schulze failed to meet a deadline to make a takeover bid for the company. (The Star Tribune, citing unnamed sources, recently reported that Schulze appears to have given up his buyout bid but is negotiating with the company’s directors regarding a role on the board.)
With that rocky phase of Best Buy’s story now potentially over, it appears the company’s leaders will be able to keep moving forward with their turnaround plan. Over the past year, Best Buy has made several rounds of job cuts and closed big-box stores; its most recent job cuts occurred last month, when the company eliminated about 400 jobs at its Richfield headquarters, a move that’s part of an effort aimed at cutting about $150 million in costs.