UBS raised its price target on Macy's (NYSE: M) to $7.00 from $6.50, while reiterating a Sell rating.

The firm said its recent channel checks indicated that third-quarter sales trends were stronger than anticipated, leading UBS to lift its Q3 earnings forecast by $0.18 to - $0.12 per share, and now expecting the retailer to report an EPS beat of $0.03. However, despite the improved quarterly outlook, the analyst anticipated that Macy's would likely reaffirm its fiscal 2025 guidance, citing continued uncertainty related to tariffs and macroeconomic conditions.

UBS noted that the market appeared to be expecting a similar stance from management, which reduced the likelihood of material revisions to consensus estimates or any significant movement in the stock's valuation multiple following the report. The firm added that while there was potential upside if Macy's issued more constructive commentary on early fourth-quarter trends, elevated bullish sentiment heading into earnings could also turn the Q3 release into a “market-clearing event.”

The options market was pricing in a ±10.5% move on earnings, higher than Macy's 7.8% historical average, which UBS said aligned with its expectations for heightened post-print volatility.