Shares of Best Buy (BBY) are on the rise after Jefferies analyst Jonathan Matuszewski upgraded the stock to Buy as survey and data work suggest the company's greater push toward services will drive long-term value and customer wallet share.

SERVICES PUSH: In a research note to investors on Wednesday, Jefferies' Matuszewski upgraded Best Buy to Buy from Hold and raised his price target on the shares to $88 from $72. Survey and data work suggest Best Buy's greater push toward services will drive long-term value and customer wallet share, Matuszewski contended. The analyst added that he now has increased confidence in the company's In-Home Advisor initiative and the "upward trajectory of high-margin services that it feeds," including Total Tech Support. His survey shows that 72% of users have renewed, half of nonmembers have an interest in adding perks, and 55% would spend more at consumer electronics retailers with this service. As memberships grow, recurring revenues should be rewarded by investors, he adds, arguing that the consumer electronics cycle will be stronger than many believe and that Best Buy is well positioned to capitalize.

After analyzing the company's share of voice for top consumer electronics products and phrases, the analyst believes "outsized share gains lie ahead," especially as pricing versus peers improves. His scrapes also point to a higher share of visitors 65-plus years old to Best Buy’s site lately, which supports the buzz around its efforts to serve seniors. The Assured Living pilot remains small, but when combined with value creation from GreatCall, Matuszewski sees expanded wallet share.

Additionally, the analyst noted that 25% of his survey respondents have used lease-to-own for big-ticket consumer electronics or appliances, and nearly 30% of those who haven't are open to it. Matuszewski thinks a FICO score in the low 600s is required for a Best Buy private label credit card, and when considering many 18-29 years old fall below 660, Generation Z and millennial customer acquisition potential is high.

PRICE ACTION: In morning trading, shares of Best Buy have gained about 2% to $75.16.