Technology product iteration drives demand. UBS Group AG reaffirms its "buy" rating for Best Buy Co., Inc. (BBY.US).

UBS Group AG stated that Best Buy Co., Inc.'s upcoming performance is likely to highlight its increasingly strengthened business model. The electronics retailer is benefiting from a new wave of tech products and internal cost controls, laying the foundation for robust performance during the holiday season and constructive prospects for 2026. UBS Group AG reiterated its "buy" rating and raised the target price from $90 to $93. UBS Group AG analyst Michael Lasser stated that Best Buy Co., Inc.'s recent revenue performance is likely to reflect improvements in product innovation in the consumer electronics sector, which is the backdrop where the chain store often performs best. He added that with sales accelerating, the company's years-long cost-cutting measures should become more evident, creating favorable conditions for the stock price. Better-than-expected same-store sales UBS Group AG stated that investors generally expect third-quarter same-store sales growth to exceed the current consensus estimate of 1.4%. Conversations with fund managers indicate that most expect growth between 2% and 3%. These results in this region will be an encouraging signal entering the holiday season, which has historically been Best Buy Co., Inc.'s most important quarter, accounting for about 40% of annual revenue. If sales trends remain strong, UBS Group AG believes the company may slightly raise its full-year earnings per share guidance to above the current range of $6.15 to $6.30, putting moderate upward pressure on expectations. Marketplace expansion broadens product categories Lasser emphasized that Best Buy Co., Inc.'s recently launched third-party marketplace in the United States is a significant strategic move. The platform launched in August, increasing the online product assortment by about six times, including expanded product lines from major electronic brands as well as new categories like sporting goods, decor, and kitchenware. UBS Group AG estimates that by fiscal year 2027, the marketplace could drive incremental revenue growth of up to 90 basis points. While short-term profit contribution is minimal due to initial investments, UBS Group AG believes that with scale, the platform's long-term profit margin prospects are attractive. In addition to new products, UBS Group AG believes several structural factors next year could support business development, including a broader device replacement cycle, potential rebound in housing-related categories, and increased sensitivity of consumer electronics to upcoming changes in fiscal policies that could lead to higher tax refunds. Lasser also pointed out that Best Buy Co., Inc.'s assumptions regarding tariff-related costs remain conservative. A recent industry conference call indicated that product cost increases are expected to be between 10% and 15%, still below statutory tariff rates, meaning management's profit margin expectations are unlikely to change significantly. Holiday and fourth-quarter outlook UBS Group AG expects the market to maintain a positive sales trend in the fourth quarter, with a general expectation of same-store sales growth of 0.8%. UBS Group AG predicts a growth of 1.5%. Strong performance may lead to slight profit growth, with cost leverage effects providing some assist, but gross margins may face slight pressure due to product mix and promotional activities.