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Goldman analyst gives Best Buy a 'Buy' rating

NEW YORK (AP) -- A Goldman Sachs analyst is giving Best Buy a "Buy" rating on Wednesday, citing improvements at the electronics chain that include more aggressive prices and its new partnership with Microsoft Corp.

Analyst Matthew Fassler moved Best Buy to "Not Rated" in April, but said that enough components of the business are improving now to warrant reinstating a rating. The move comes two days after a Credit Suisse analyst resumed coverage of Best Buy with an "Outperform" rating and boosted its price target.

THE OPINION: Best Buy has been working on a turnaround plan as it faces increased competition from online retailers and discount stores. The plan includes closing stores, cutting costs and investing in employee training. In April, the company also said that it would sell its 50 percent stake in its European joint venture to streamline its business and strengthen its balance sheet.

In June, Microsoft Corp. revealed plans for "store-within-a-store" sections in Best Buy stores. The Microsoft mini-stores are expected to be set up in about 600 Best Buy locations in the U.S. and Canada by early September. Best Buy has similar store-within-stores for Apple, Samsung and Magnolia products.

Fassler says that Goldman's pricing studies show Best Buy is closing the gap on pricing for big-ticket items when compared with Amazon. He also anticipates that the partnership with Microsoft could have a bigger impact than the one with Samsung, partly because Best Buy will have at least two dedicated Microsoft-certified staffers at each Windows store and the store-within-a-store will be large — at 1,500 to 2,000 square feet per location.

Fassler said that the sale of the European joint venture didn't come as much of a surprise, but it helps the chain concentrate its efforts mostly on North America and increases financial flexibility.

THE STOCK: Best Buy Co.'s stock added 55 cents to $29.24 in afternoon trading. The stock has traded between $11.20 and $29.91 in the last 52 weeks, and has more than doubled in the first half of the year.