Best Buy can continue its post-China trade agreement rally, says UBS

UBS anticipates further gains for Best Buy (BBY) stock due to easing US-China trade tensions, citing favorable tariff developments and sales momentum. While the stock is down over 15% YTD, it has risen 8% in May, including a 6% surge last Monday after the tariff reduction news. UBS believes that even a 30% tariff on Chinese imports is manageable for Best Buy, allowing better control over inventory and pricing in the coming months.

Analysis

UBS has issued a positive outlook for Best Buy (BBY), suggesting its stock could extend its recent rally due to abating U.S.-China trade tensions. Analyst Michael Lasser highlights that favorable tariff developments and existing sales momentum are key supports for the shares, even with some lingering uncertainty. Best Buy's stock, despite being down over 15% year-to-date in 2025, has gained approximately 8% in May, including a significant 6% surge last Monday following the announcement of temporarily lowered tariffs. UBS believes that even if the current 30% tariff level on Chinese imports were to remain, it represents a manageable scenario for Best Buy. The analyst further notes that a ~30% tariff, with lower rates for certain consumer electronics, would create a more stable backdrop, enabling the retailer to better manage inventory flow and product pricing in the coming months. Consequently, UBS perceives the risk-reward profile for BBY as skewed towards the upside, indicating potential for further appreciation.

Key Decisions for Investors

• Investors should closely monitor developments in U.S.-China trade relations, as further de-escalation or favorable tariff adjustments could act as significant positive catalysts for Best Buy's stock.
• Consider the analyst's view that even a sustained ~30% tariff environment is navigable for Best Buy, potentially allowing the company to improve inventory management and pricing strategies, which could support margins.
• Given the stock's recent positive momentum in May against a year-to-date decline, and UBS's assessment of an upside-tilted risk-reward, investors might evaluate BBY for potential appreciation, while remaining mindful of the 'lingering uncertainty' associated with trade policies.