At time of writing, the JB Hi-Fi Ltd [ASX:JBH], share price is up 2.38% trading at $34.80.
Today we look at the JBH share price in the context of what is happening with Australian retail.
JB Hi-Fi became a powerful force in retail over the last decade or so; as such it may have more staying power than other retail brands.
We look over their financials and the potential for a continued bounce back after climbing off of March lows.
Let’s pull up the monthly chart to see what’s happening with JBH share price:
What to make of this?
JBH share price in context
As you can see, the JBH share price burst through the first line marked on the chart.
There is a support line marked at $27.
Well, it burst through that to rebound and the JBH share price is now trading well above that.
But if you take my support line (yellow at $22), which takes in three tops, some sideways trading and three lows, this might be a better way to analyse the current JBH share price.
Techy gadgets are increasingly essential to our lives, and JB Hi-Fi stands to benefit from its prominent place in the market as money starts coursing through the economy again.
Now, I am generally more negative on retail’s prospects in this environment.
This is something I spelled out in a recent piece on the SCG share price…
So, here’s my first thought on the current JBH share price.
Thought #1: JBH share price could be a bargain given its financials are relatively strong
Let’s take a quick look at JBH’s finances.
So, as of their pre-corona half-yearly results they have $76.8 million in cash and cash equivalents against a market cap of $3.9 billion at time of writing.
In the small-cap world, I’d be concerned.
But JB Hi-Fi is a mature business, so I’d just point out that they have $386.6 million in trade and receivables and a significant amount of inventory, $1.13 billion in fact.
Now there is no guarantee that all this inventory will be sold, tech can go out of fashion quickly.
But it points to the fact that JB Hi-Fi could have a sizeable financial buffer against the effects of this pandemic.
In a recent announcement, which highlighted remarkably strong sales in Q3 FY20, the company also said, ‘the Group has received credit approval for an additional $260m of committed short term debt facilities on favourable terms.’
I still think markets could have another leg down, but JB Hi-Fi’s sideways trading indicates that things may have stabilised for now.
Thought #2: Dividend and P/E
Currently, JBH has a P/E of 15 and a dividend yield of 4.41%.
These are backwards looking of course, but as a metric are worth considering.
I think tech retail may prove to be different than other forms of retail; such is our reliance on these gadgets.
It’s no guarantee, but JB Hi-Fi could surprise to the upside in coming months.
The federal government is in the process of rolling back restrictions.
If there is a surge in the JBH share price in the coming weeks, it may be too late to get on this particular glimpse of hope in the retail downturn.
But if there is another leg down for the ASX, JBH could be worthy of the watchlist again.
Say, if it starts hovering just above $22 once more.
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