Seven years ago, investors had left Best Buy (NYSE:BBY) stock for dead, believing that the e-commerce revolution was sure to crush the consumer electronics giant. However, former CEO Hubert Joly led a remarkable turnaround. By aggressively cutting costs, Best Buy was able to get more competitive on pricing and invest in better service, while also expanding its profit margin.

Adjusted earnings per share bottomed out at $2.07 in fiscal 2014 but surged to a record $5.32 in fiscal 2019. While earnings growth is bound to be slower going forward, Best Buy believes there is meaningful room for additional growth over the next five years. Last week, the company shared its ambitious plans and targets for that period with investors.

Best Buy wants to deepen its customer relationships

One of the key themes of Best Buy's investor presentation was that growing the number of meaningful interactions with customers will build loyalty to the brand, driving future sales. Best Buy set a goal of doubling the number of "significant customer relationship events" to 50 million by fiscal 2025.

This metric covers a range of interactions, including subscriptions to Best Buy's new "Total Tech Support" offering; home visits related to in-home consultations, installations, and repairs; the provision of financial services such as "lease-to-own" solutions; active engagement with the Best Buy mobile app; and senior citizens relying on Best Buy's GreatCall subsidiary to help them safely stay in their homes as they age. Consumers who interact with Best Buy more are more likely to love the brand, and people who love the brand spend 1.5 times as much as the average customer.

Best Buy sees plenty of room to improve its engagement with customers over the next five years. Indeed, many of its key initiatives in this vein are quite new and have lots of runway for growth.

The exterior of a Best Buy store.

Best Buy sees plenty of opportunity to grow its core business. Image source: Best Buy.

For example, lease-to-own was launched earlier this year and is available in three dozen states so far. The program will be rolled out to another nine states a few weeks from now and will be available for online purchases next year. Meanwhile, Total Tech Support launched nationally in May 2018 following a successful pilot and already has 2 million subscribers. Finally, Best Buy created the in-home advisor role two years ago and now has 600 associates in that position, plus 900 Magnolia custom home theater designers. Customers who use either of those services tend to spend significantly more money at Best Buy.

The move into healthcare

In addition to using deeper customer relationships as a tool to drive growth in its core consumer electronics markets, Best Buy sees healthcare as a huge adjacent market that it can look to for growth. This entails moving beyond the sale of health-related gadgets and into the provision of health-related services.

Best Buy has gained a foothold in this market -- not to mention healthcare industry expertise -- through a recent string of acquisitions: most notably, GreatCall. Rapid growth in the number of senior citizens in the U.S. is creating a big opportunity to sign up additional members for the GreatCall service, which includes 24/7 access to U.S.-based agents who can assist with non-emergency health situations and dispatch emergency personnel if necessary.

In addition to these consumer-paid services, Best Buy is adding services aimed at reducing the cost of care for senior citizens and paid for by insurance companies. The company says that its remote monitoring systems can reduce the cost of caring for frail seniors by 16% to 25%. Additionally, Best Buy's CST subsidiary already works with several insurers to provide a variety of care coordination services.

Today, Best Buy serves more than 1 million senior citizens through its GreatCall and CST units. It hopes to grow that number to 5 million by fiscal 2025. If the company can hit this goal, the upside in terms of revenue would be substantial.

Best Buy's growth goals seem realistic

Best Buy hopes to grow its revenue to $50 billion by fiscal 2025, compared to its fiscal 2020 guidance of $43.1 billion to $43.6 billion. That implies a modest compound annual growth rate of about 3%. Meanwhile, another $1 billion of cost cuts and the growth of its higher-margin services businesses should enable Best Buy to expand its operating margin to 5%, up from 4.6% recently.

Some analysts warn that the aging of the population is a double-edged sword, because as buying power shifts to younger, more tech-savvy generations, fewer people will need the hand-holding that Best Buy provides. However, Best Buy's management argues that technology continues to evolve rapidly, and there will always be a large number of consumers looking for advice about how to make technology work best for them.

Assuming Best Buy can achieve its revenue and margin goals, operating income would reach approximately $2.5 billion five years from now, compared to $2 billion last year. That would likely translate to EPS of more than $8, depending on how much stock Best Buy repurchases over the next few years. Best Buy stock also pays a meaningful dividend, with a current yield of about 3%. The gains may not be extraordinary, but this outlook leaves plenty of upside for Best Buy shares over the next five years.