Best Buy's share price could bulk up by nearly a third over the next 12 months, with initiatives such as a membership program holding the potential to boost business for the electronics retailer, said Bank of America.
The investment bank raised its 12-month price target on Best Buy to $157 from $145 in a research note Wednesday following the release of the retailer's second-quarter earnings report. The 29% upside call is based on the stock's closing price on Tuesday at $121.49.
Best Buy is leveraging on initiatives to thrive, BofA said, noting the retailer offered updates on several of its projects including "Best Buy Beta," a pilot membership program that combines tech support and credit card programs with other benefits. That program launched in April. The company is also testing square-footage store prototypes and experimenting with a new type of outlet store and is continuing to make supply chain and inventory improvements.
BofA said Best Buy's increased same-store sales guidance for fiscal year 2022 is likely — and typically — conservative, saying the bank's data tracking credit and debit spending indicate resilience in home-related categories even as coronavirus-related restrictions on businesses have loosened. Best Buy sees enterprise same-store sales growth of 9% to 11% compared with its previous projection of 3% to 6% growth.
Best Buy on Tuesday posted second-quarter 2022 adjusted earnings of $2.78 a share on a 20% rise in revenue to $11.85 billion. The results outpaced expectations of $1.85 a share and revenue of $11.49 billion in a Refinitiv poll of analysts. Strength was broad-based by product category, led by appliances and home theatre items among consumer electronics, said BofA.
"We were also encouraged by management's comments around strong demand for services and continue to view BBY as high quality and steady grower with attractive valuation, a strong balance sheet and continued room for upside," analyst Elizabeth Suzuki said in the note reiterating BofA's buy rating on Best Buy.
Best Buy shares jumped by 8.3% on Tuesday after the earnings report. .
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