Shares of Best Buy (BBY) - Get Best Buy Co., Inc. Report advanced Tuesday after analysts at Piper Sandler raised their price target on the consumer electronics retailer's stock to $155 a share from $150 citing "attractive discounts" to its membership program Best Buy Total Tech coupled with a strong holiday sales outlook for consumer electronics by Mastercard.
"Regarding Best Buy Total Tech, our pricing analysis suggests membership discounts are attractive (~15% off regular pricing), and we believe this should help drive adoption and repeat purchase behavior," wrote Piper Sandler analyst Peter J. Keith in a note to analysts.
"Across a wide range of products and categories, we find that Total Tech pricing offers members a median discount of 15% (or ~$100) compared to regular pricing. When looking at the Total tech pricing discount vs. competitors (ie. Apple (AAPL) - Get Apple Inc. (AAPL) Report, Amazon (AMZN) - Get Amazon.com, Inc. Report, Target (TGT) - Get Target Corporation Report, Home Depot (HD) - Get Home Depot, Inc. (HD) Report, etc.), we find a Total Tech discount of 5-10%," Keith noted.
Piper Sandler expects Total Tech subscribers to drive 3% to 4% rise in comparable sales for the next two years.
The investment firm reiterated an overweight rating on the stock.
"Separately, for the fourth quarter, Mastercard is calling for Consumer Electronics retail sales growth of +12% this holiday season," Keith added.
Shares of the Minneapolis retailer at last check rose 1.04% to $121.73.
Though Best Buy’s program is pricier -- $199 a year compared with Prime’s $119 -- it is expected to appeal to heavy gadget users.
The analysts also called Best Buy a cheap stock based on valuation compared to other "mature growth retailers."