Best Buy (BBY) upgraded due to Circuit City's impending bankruptcy

Best Buy, Inc. (NYSE: BBY) shares were upgraded this week based on the likely bankruptcy of consumer electronics competitor Circuit City Stores, Inc. (NYSE: CC). In fact, analyst Bradley B. Thomas stated that, "We believe a Circuit City bankruptcy has become a question of 'when' rather than 'if'."

Circuit City, which recently fired its CEO after years of incredibly subpar performance and absolutely dismal results, isn't going anywhere right now. It's not even drawing interest from potential suitors. When you can't find a buyer, you know there's trouble brewing (even before the financial system went berserk in September). Big trouble. The company is looking at "strategic alternatives" to its business, which have to include declaring bankruptcy.

Thomas' assessment of Best Buy takes into consideration the weakness in the consumer economy and the impending bad retail holiday season, but Circuit City's situation could be more powerful than either of those factors. He also points to the fact that BBY shares have dropped 45% in just over a month, making it an attractive buy given Circuit City's weakness. If the consumer electronics industry in the U.S. has one large competitor after Circuit City folds up shop, it will be in prime position. And that position will be held by Best Buy.