Tariffs Cast A Shadow Over Best Buy, Target: Could This Be A Buying Opportunity?

Zinger Key Points

Tariffs threaten Best Buy’s turnaround, with 80% sourcing exposure from China and Mexico weighing on margins.
Target has cut China reliance to 30%, but new trade barriers still create uncertainty for the retailer.
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Just as Best Buy Co Inc BBY and Target Corp TGT gear up for a turnaround, tariffs are threatening to spoil the party.

Both retailers are navigating a shifting consumer landscape, but with significant sourcing exposure to China and Mexico, new trade barriers could weigh on margins.

Tariffs Eclipse Best Buy's Comeback

JPMorgan analyst Christopher Horvers sees Best Buy as a clear victim of tariff uncertainty. Despite posting its first positive comp since third quarter of 2021 and showing strong margin upside, the retailer is highly exposed, sourcing 60% of its goods from China and 20% from Mexico.

"Tariffs ruin a strong report," Horvers noted, adding that while AI-driven computing upgrades and gaming tailwinds should help in the second half of 2025, the stock remains under pressure.

While Horvers has slashed Best Buy stock’s price target to $110 (from $115), he still believes in the long-term upside, citing self-help measures like advertising growth and its new marketplace.

Target Tries To Sidestep The Tariff Hit

Target, meanwhile, is playing a defensive game. Horvers highlights that Target has steadily reduced its China reliance from 60% in 2017 to 30% today, with plans to bring it down to 25% next year.

They're mitigating the impact, but with new tariffs on China, Mexico, and Canada, uncertainty lingers, he explained. Target is leaning into alternative profit streams like its Roundel ad business and marketplace expansion, which could cushion some of the tariff blow.

However, Horvers remains cautious on the stock's near-term upside, lowering the price target to $140 (from $146).

Technically, both stocks are struggling. Best Buy is down 12.7% YTD and Target has declined 14.6% YTD. They trade well below key moving averages, signaling further downside risk.

Until tariff uncertainty clears, investors may remain wary, though Horvers sees long-term opportunity for those willing to look past the trade war turbulence.

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