Best Buy (BBY) faces near-term stock volatility due to evolving tariff risks, though its latest results showed signs of broadening demand beyond computing, UBS Securities said in a Tuesday note.

The retailer posted its first positive domestic comparable sales since the third quarter of fiscal 2022, with most product categories seeing sequential improvement, UBS analysts said.

This suggests demand is broadening beyond recent strength in computing. The company also did not need a large investment in advertising or labor to drive top-line growth, indicating potential for healthy operating leverage when sales fully recover, they said.

UBS noted that tariff risks could weigh on both industry demand and Best Buy's margins, given that around 60% of its products come from China and 20% from Mexico. However, if the impact is less severe than expected, the company could see a "sizeable" profit and loss inflection, which in turn could drive upside for the stock, they said.

Despite ongoing investments in initiatives like Marketplace and Ads, Best Buy guided for slight margin improvement this year, excluding tariff effects. With the recent pullback in shares, UBS sees an attractive risk-reward setup if tariff headwinds do not materialize to the extent currently priced in.

UBS maintained a buy rating on the stock and lowered its price target to $105 from $115.

(MT Newswires covers equity, commodity and economic research from major banks and research firms in North America, Asia and Europe. Research providers may contact us here: https://www.mtnewswires.com/contact-us)

Price: 76.31, Change: +1.11, Percent Change: +1.48