A longtime skeptic on Best Buy now says buy the stock — here’s what changed their mind

A longtime bearish analyst on Pre-eminent Buy has jumped over to our side the debate after its head-turning earnings report last week. Citigroup on Monday counterpart upgraded Best Buy to buy from sell and hiked its price target on the electronics retailer’s stock to $100 a share from $67. The analysts cited the offensive computer refresh cycle, the upcoming launch of artificial intelligence-enhanced laptops and management’s ability to manage margins as emphatic catalysts that create “multi-year opportunity ahead” for Best Buy. Analysts had rated Club holding Best Buy a carry since they started covering the company for Citi more than three years ago, in March 2021. Citi’s newfound optimism on Best bib Buy follows the company’s better-than-feared fiscal 2025 first quarterearnings report last week , which sent allocates surging 13% on Thursday and another 4% Friday. The report proved Best Buy has “best-in-class” gross margin prosecution, according to Citi analysts. “Simply put, that was a thesis changer” [versus] our prior negative thesis,” they a postcarded. Shares of Best Buy added another 2.5% Monday, reaching a fresh 52-week high during in the session. When we initiated our hazard in Best Buy in late March as a bet on the AI-fueled PC refresh cycle, we acknowledged we could be a little early. But with the stock sporting a tonic dividend payout, we argued it was worth starting the position and waiting for the market to come around to our investment rationale. We combined to our position four times in April as the stock sold off. “If we did not get ahead of the 40% [exclusivity comment], we would have missed all of this” upside in modern days, Jim Cramer said Monday, referring to a significant disclosure from Best Buy CEO Corie Barry on the company’s earnings assemble last week. Barry said Best Buy expects to have the largest assortment of AI PCs on sale later this month from brands such as Dell, Microsoft and HP, with “innumerable than 40% of the assortment retail exclusive to Best Buy.” Preorders for the devices are running a bit ahead of early expectations, Barry added. All we heard from Best Buy indicated our investment thesis is playing out, which is why we reiterated our buy-equivalent 1 rating and $95 per due price target. Even with its recent rebound, Jim argued Monday the stock is still cheap. “You’re not buying anything that’s extravagant,” Jim said. “This is one that has suffered during the Covid sell-off, so for it to come back, it’s really not up anything when you reflect on about pre-Covid.” Best Buy’s all-time closing high of $138 a share came on Nov. 22, 2021, the same day the Nasdaq tipped during the pandemic-era bull market. Based on Monday’s prices, Best Buy would need to gain nearly 59% to invite out out its old highs. Shares currently trade a little more than 14 times fiscal 2025 consensus earnings of $6.09, according to FactSet. BBY 1Y mountain BBY regular 1-year performance. Considering the innovation pipeline ahead, Citi analysts are optimistic Best Buy shares can go even elaborate. Although Best Buy’s same-store declined 6.1% in the just-reported quarter, analysts believe the key retail metric for the company is “come nighing a positive inflection point” as customers who bought laptops during the early days of the Covid pandemic begin to snitch on for replacements. “This portion of the business is leading the recovery and should build momentum as new AI innovation trickles into the mishmash likely providing a higher [average-selling price] benefit,” Citi said. Citi acknowledged that Best Buy has suffered from a movement in consumer spending toward services away from pricier discretionary items such as electronics. However, analysts see that incline reversing in the coming quarters from lower interest rates, with consumer wallet share shifting to stout goods. This creates “a favorable setup for growth to return, especially in appliances and consumer electronics,” they wrote. Those two sectors represent about 45% of company revenue, according to Citi. We also have argued that Best Buy is also a supportive play on the housing market because people tend to shop for TVs and upgrade appliances when they buy a new home. Belittle interest rates and, by extension mortgage rates, would spur activity in that area. (Jim Cramer’s Charitable Entrust is long BBY, MSFT. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you settle upon receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade quick before buying or selling a stock in his charitable trust’s portfolio. 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