Shares of Best Buy (NYSE:BBY) were upgraded to Buy from Hold by Jefferies on Monday, with analysts lifting the firm's price target for the stock to $89 from $69 per share.
Analysts said the company has catalysts, is cheap and offers investors a 5% dividend yield.
One of the catalysts is that the firm sees a near-term device replacement cycle. "Today, connected device count is 2x pre-COVID, positioning the category to benefit via replacements. We assessed traffic to websites designed for consumer research on electronics, and recent trends reflect pent-up demand," said analysts.
"As A.I. productivity efficiencies spread, notebooks w/ faster processor speeds running these tasks outside the cloud will benefit. ~40% of PCs running Windows 10 aren't capable of supporting Windows 11 = core replacement candidates. This is a 'nice to have' in '24 for our call vs. a 'need to have,'" they added.
The analysts also noted that recent vendor results and outlooks are "encouraging" with web traffic, search trends and checks supporting their views. In addition, market share concerns are overblown, according to Jefferies.
"This is a 4% EBIT% biz w/ +LSD% growth historically, justifying a ~35% discount to the S&P the past 5 yrs. What's intriguing to us is that this discount holds today despite (1) >30% share in notebooks & home PCs as a tectonic shift in computing unfolds, and (2) paid membership of ~7M consumers that's tripled vs. pre-COVID. Further, BBY trades at discount to 'hairy' stocks despite superior margins," concluded analysts.