2024.06.17 12:09
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Best Buy is expected to benefit from the consumer electronics refresh cycle, UBS is bullish on it to $106

After UBS Group upgraded Best Buy's rating, its stock price rose by nearly 4%. UBS expects Best Buy to benefit from the consumer electronics refresh cycle and the supply cycle of new products. UBS has set a target price of $106 for Best Buy, with an upside potential of over 20%. UBS analysts pointed out that Best Buy's market share in the consumer electronics sales sector tends to increase significantly in the early stages of the new product cycle. It is expected that 2024 will be the year of AI smartphones, with Apple expected to capture more than half of the market share

According to the financial news app Zhitong Finance, after the international bank UBS upgraded its stock rating on the leading US consumer electronics retailer Best Buy (BBY.US) from "Neutral" to "Buy", Best Buy's stock price surged nearly 4% in pre-market trading. UBS stated that Best Buy will benefit from the upgrade cycle of consumer electronics such as PCs and smartphones, as well as the supply cycle often associated with new products. UBS has set a 12-month target price for Best Buy as high as $106, indicating a potential increase of over 20%.

UBS stock analyst Michael Lasser wrote in the report that these favorable factors may collectively drive Best Buy's overall sales to achieve a "strong recovery trend" in the second half of 2025 and beyond. The analyst pointed out in the report, "It is obvious that in the early stages of the consumer electronics product cycle, Best Buy's market share in consumer electronics sales tends to increase significantly."

The main point of UBS analyst Lasser is that with the introduction of PC, smartphones, and smartwatches integrated with AI large models this year, Best Buy, which holds a significant position in the US consumer electronics retail sector, is bound to benefit comprehensively from the new cycle of consumer electronics updates.

In the smartphone sales sector that Best Buy focuses on, undoubtedly, 2024 will be the "AI smartphone year". Research firm Canalys predicts that by 2024, the global penetration rate of AI smartphones will reach 16%, with Apple expected to occupy over half of the market share due to its advantage in the high-end market. By 2028, Canalys forecasts that the proportion of AI smartphones will exponentially increase to 54%, with a compound annual growth rate (CAGR) of 63% in the AI smartphone market size from 2023 to 2028, mainly driven by strong consumer demand for enhanced features such as AI assistants and edge-side automation processing.

It is worth noting that analyst Lasser also believes that with the gradual improvement in comparable sales, Best Buy's restructuring efforts at the operational level may bring significant profit leverage.

UBS's forecast data shows that as Best Buy's "cost reduction and profit increase" measures sweep across the United States, the number of employees per store has decreased from 102 in the 2020 fiscal year to 77 in the latest fiscal year. Even if this number increases to 83, and Best Buy's comparable sales growth reaches around 3%, earnings per share could exceed $7.30 (currently $6.70).

In pre-market trading, Best Buy's stock price surged nearly 4% to $90.650, surpassing its 52-week high, while UBS's target price is as high as $106. Over the past six weeks, the company's stock price has risen by over 15%. Short interest in Best Buy accounts for 7.19% of the total outstanding shares. New buyers of Best Buy stock could receive a dividend yield of 4.31%