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Best Buy Stock Rises on Bullish Piper Sandler Note

Piper Sandler raised its price target on Best Buy to a street high of $155 a share.

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.

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"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.

Best Buy's pilot membership program adds Amazon  (AMZN) - Get Amazon.com, Inc. Report Prime-like features such as exclusive member pricing and free shipping.

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."