FILE - In this Thursday Nov 22, 2012 file photo, people wait in line for a Best Buy store to open in Northeast Philadelphia. Best Buy Co. says its fourth-quarter loss narrowed as it cut costs to offset nearly flat sales during the key holiday quarter. The financial results beat expectations and shares rose more than 6 percent in premarket trading. (AP Photo/Joseph Kaczmarek, File)
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FILE - In this Thursday Nov 22, 2012 file photo, people wait in line for a Best Buy store to open in Northeast Philadelphia. Best Buy Co. says its fourth-quarter loss narrowed as it cut costs to offset nearly flat sales during the key holiday quarter. The financial results beat expectations and shares rose more than 6 percent in premarket trading. (AP Photo/Joseph Kaczmarek, File)
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In this Thursday, June 21, 2012, file photo, customers walk in and out of Best Buy in Danvers, Mass. Best Buy Co. is reporting Monday, Aug. 21, 2012, a 90 percent drop in net income during the second quarter, dragged down by restructuring charges and weak sales. The company also withdrew its earnings guidance for the year.(AP Photo/Elise Amendola)
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In this Thursday, June 21, 2012, file photo, customers walk in and out of Best Buy in Danvers, Mass. Best Buy Co. is reporting Monday, Aug. 21, 2012, a 90 percent drop in net income during the second quarter, dragged down by restructuring charges and weak sales. The company also withdrew its earnings guidance for the year. (AP Photo/Elise Amendola)
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FILE - In a Tuesday, Aug. 14, 2012, file photo, aperson walks toward a Home Depot in Nashville, Tenn. Home Depot’s fiscal fourth-quarter net income surged 32 percent, the home improvement retailer said Tuesday Feb. 26, 2013. (AP Photo/Mark Humphrey, File)
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FILE -In this Monday, Nov. 19, 2012, file photo, Denise Smith-Lad, left, asks her grandson Jordan Smith, 6, what he would like to eat as they camp in front of a Best Buy store in Cockrell Hill, Texas. Best Buy Co. reported another dismal quarter on Tuesday, Nov. 20, 2012, recording a loss in the third quarter, hurt by a continued sales slump and charges related to restructuring. Shares fell 5 percent in premarket trading. The electronics chain is struggling to reverse a years long decline in its business as competition from online stores and discounters increases, and consumers' tastes shift from more profitable items like TVs and desktop computers toward less profitable smartphones and tablets. (AP Photo/LM Otero)
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A Nov. 28, 2011 photo, shows a jewelry display at a Tiffany & Co. store in Santa Clara, Calif. Tiffany & Co. said Monday Aug. 27, 2012 their net income rose 2 percent in the quarter. (AP Photo/Paul Sakuma)
Analyst: Best Buy shares poised for growth
NEW YORK (
AP) — A
Piper Jaffray analyst on Monday upgraded
Best Buy Co., saying that the struggling electronics retailer is starting to right itself and that its shares are poised for growth.
THE BACKGROUND: Best Buy has been working to turn around its results as it faces tough competition from online retailers and discounters. The company has cut jobs, invested in training employees and started matching online prices. And its financial results show that the changes are beginning to help.
Earlier this month, the company reported that U.S. revenue in stores open at least 14 months rose 0.9 percent during the fourth quarter, the best performance in 11 quarters. The metric is a key measure of a retailer's health, because it excludes revenue from stores that recently opened or closed. Its adjusted earnings and revenue topped Wall Street's expectations.
THE OPINION: Peter Keith raised his rating for Best Buy to "Overweight" from "Neutral" and boosted his price target for the shares by $10 to $26.
"We believe new management is in the very early stages of a multi-year turnaround process that could drive substantial improvement to operating margin, return on investment capital and earnings per share," Keith wrote in a note to investors.
The analyst said Best Buy's new CEO Hubert Joly and other top executives have brought in a needed focus on improving efficiency, while the hiring of new department heads and the streamlining of management will help fix areas most in need of improvement and bridge the gap between the company's corporate headquarters and its stores.
Meanwhile, supplier-related improvements should help stabilize, or even slightly improve, profitability, Keith said.
THE SHARES: Up 4 cents to $20.21 in afternoon trading, after peaking at $20.45 earlier in the day. Over the past 52 weeks, the company's shares have traded between $11.20 and $27.95.
After losing about half their value in 2012, Best Buy shares have gained about 70 percent since the start of this year.
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