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DB Alex. Brown upgraded Best Buy (BBY
) to buy.
Analyst Dan Wewer says gross margins are favorable and he noted the increased $2.15-$2.20 fiscal 2002 (Feb.) EPS guidance vs. his original $2.09 estimate. Wewer raised his fiscal 2002 EPS estimate to $2.15. He says Best Buy is the most important beneficiary of the demise of Circuit City, with about 50% of its store base overlapping. Also, Best Buy has the strongest money flow score of any hardline retailer. Shares are trading at a depressed valuation of about 17 times the forward EPS estimate. Average valuation is at an 8% premium to S&P, which would imply a $60 stock price.