Best Buy Seen Profiting From New Membership Program

Consumer electronics retailer Best Buy (BBY) could get a meaningful sales and earnings lift from the launch of its new membership program, a Wall Street analyst says. BBY stock rose on Monday.


Best Buy is due to launch its new membership program, Best Buy Total Tech, in late October.

Piper Sandler analyst Peter Keith called the new program “a potential game-changer.” Best Buy Total Tech is “one of the most intriguing initiatives Best Buy has launched in 5+ years,” he said in a note to clients.

Keith reiterated his overweight, or buy, rating on BBY stock and raised his price target to 150 from 146. He noted the stock’s “cheap valuation” as an opportunity for investors.

BBY Stock Jumps

In afternoon trading on the stock market today, BBY jumped 5.1%, near 110.05.

“We expect the new membership program to garner significant interest/sign-ups over the holiday season,” Keith said. “Ultimately, we expect the membership program to drive incremental purchase activity by members.”

His analysis suggests that the membership program will drive a 3% increase in comparable-store sales and a 5%-8% lift in earnings per share each year for the next two years.

Expanded Benefits

Best Buy Total Tech will include an expanded list of benefits compared with the original Total Tech Support program, which began in 2018. The price remains the same at $199 a year.

The membership program includes unlimited Geek Squad technology support on all the technology in your home.

It also includes 24 months of product protection on most Best Buy purchases and two-year Apple Care on all Apple (AAPL) device purchases.

Plus, the program offers free shipping and standard installation, including large appliances. It also will have exclusive member pricing.

BBY stock notched a record high of 128.57 on May 25. Since then, it has drifted mostly sideways. BBY stock perked up after the retailer posted an upbeat second-quarter earnings report on Aug. 24. It climbed as high as 124.91 on the news before retreating.

Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.


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