Bloomberg

Best Buy (BBY - Get Report) was upgraded to outperform from perform by analysts at Oppenheimer as they believe investors underappreciate the effectiveness of the retailer's changing strategy. 

The stock was flat on Friday, down 0.64% to $70.11 a share.

The analysts established a price target of $86 on the stock, which is 21% above the stock's current level. 

"Over the past few years, under the direction of new senior leadership, Best Buy has undergone a significant transformation, whereby it evolved from a traditional chain of large-format superstores to one of retail's preeminent omni-channel operators, which utilizes digital well as a means to connect better with consumers and enhance underlying disciplines," the analysts said.

In Oppenheimer's view, the market hasn't recognized these shifts.

"We believe investors are still not fully embracing improved sales and EPS power of Best Buy, particularly as new drivers for the company are beginning to emerge," the analysts wrote. Digital sales have been increasing at a double-digit (percentage terms) rate for the past two years or so, according to the company's earnings releases. 

Oppenheimer is now looking for 2019 and 2020 earnings per share of $5.70 and $6.18, respectively, up from an initial $5.54 and $5.80. 

With online sales now consistently representing about 16% of domestic revenue, according to Oppenheimer, "e-commerce [is] now a key sales driver." 

The shares have risen a modest 4.5% in the past year.

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