Goldman Sachs Group Inc (NYSE:GS) revealed today that it has resumed the coverage on Best Buy Co., Inc. (NYSE:BBY) with a with a “Buy” rating and a price target of $34. The price target given by Goldman represents a 16 percent upside from the current price of $28.69.

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Analyst comments

Analyst Matthew J. Fassler believes that the new initiatives taken by the electronic retailer have the potential to drive the numbers higher for the company.

As per the analyst, “the basic tenets of the Best Buy Co., Inc. (NYSE:BBY) story are consistent with our initial “re-launch” in March.” Changes made in the top level management are providing new strategic perspective to the company, and at the same time improving the financial discipline.

Also, the analyst notes that the “number of elements of the story have improved further” some of these elements are “aggressive pricing; a new instore alliance with Microsoft Corporation (NASDAQ:MSFT); visibility to improvement in the online effort; and the sale of the firm’s European business.”

Best Buy Competing with Amazon

Based on pricing studies done by Goldman Sachs Group Inc (NYSE:GS), Best Buy Co., Inc. (NYSE:BBY) has narrowed its price gap against Amazon.com, Inc. (NASDAQ:AMZN) on the most relevant big-ticket items. Consumer demand elasticity has been changed significantly due to the increased price transparency for ubiquitous consumer electronics products and “BBY resisted adapting for many years.”

Electronic Retailer, recently started price matching strategy with large competitors including Amazon and, as a result, slashed the prices further in the first quarter. Though these strategies adversely affect the gross margin, they also ensure “more sustainable earnings base.”

Online business

Goldman Sachs Group Inc (NYSE:GS) expects Best Buy Co., Inc. (NYSE:BBY) to report impressive improvement in its online business in 2014. This segment contributes around 7 percent of domestic sales. Though the segment recently generated mid-teens growth, “BBY sharply under-indexes in the channel and operates with a subpar conversion rate.”

Best Buy Partnership with Microsoft

Microsoft Corporation (NASDAQ:MSFT) and Best Buy Co., Inc. (NYSE:BBY) announced a strategic partnership recently to set up Windows stores within Best Buy. The partnership will boost the sales of “Win-Tel” PCs, which is a significant category. As per the report, this partnership will have a greater impact than the partnership with Samsung.

Guidance for 2013

For the year 2013, the firm has raised its guidance from $2.25 to $2.35 per share. For 2014, the revised estimates are $2.85 per share from $2.60 while estimates for 2015 have been raised from $2.60 to $2.83 per share.

Best Buy Co., Inc. (NYSE:BBY) shares have gained 142 percent YTD and in the premarket trading on Wednesday, shares were mostly flat. Yesterday, shares closed at $28.69, with a 52 week range of $11.20-$29.91.