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.