Morgan Stanley Initiates On Best Buy, Says Pricing Has Never Been More Competitive With Amazon


Best Buy (NYSE: BBY) shares are moving higher Tuesday morning after Morgan Stanley started coverage of the company at Overweight with a $36 price target.

In the note titled, “The Empire Strikes Back,” analyst Simeon Gutman lays out his case for $3.75 of EPS in 2017. This compares to TTM EPS of $2.07.

Gutman writes, “At the core of our proprietary analysis is that BBY's total offering to the customer is now segment-leading, with competitive pricing (even before price match), excellent customer service, a robust rewards program, and easy-to-use website and mobile apps.”

The note goes on to say that pricing has never been more competitive with Amazon.

Further, “Encouragingly, the gains have continued into 2014 with Q1 market share at 21.9%, a 150 bps YoY improvement and a recent quarterly high. We believe the overall market share trend demonstrates that BBY's strategy is working and importantly that its price investments (particularly over the holiday) are resonating with consumers.”

The $36 price target is based on 14 times Morgan Stanley’s EPS estimate.

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