Best Buy (BBY) could deliver a solid Q2, keep sales momentum into August, raise its full-year outlook and get more profit support from its marketplace and advertising businesses, although tougher comparisons, higher component costs and high investor expectations could limit further upside, UBS said in a note emailed Tuesday.
UBS expects Q2 comparable sales to rise 2.4%, above the 1.2% consensus estimate, as demand in computing, mobile, TVs and newer product categories helps offset weaker benefits from past product launches, according to the note.
The investment firm forecasts Q2 earnings of $1.42 per share, above the $1.37 consensus estimate, with gross margin expected to improve as higher-margin marketplace and advertising businesses expand.
Stronger Q2 results and healthy August sales would support the case for longer-lasting demand improvement, but tougher comparisons, rising memory costs and uncertainty around new leadership remain near-term risks, the investment firm said.
UBS maintained the company's neutral rating and $86 price target.
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