By Chris Nicholls
SYDNEY: JB Hi-Fi has been rated an “underperformer” by Credit Suisse analyst Andrew McLennan in a report on the music and electronics retailer.
The reason for the rating came from Credit Suisse’s prediction of a 16 per cent return for the stock for 2008, while the expected aggregate for the local market stood at 28 per cent.
According to the report, McLennan said he expected the company’s share price after earnings revisions would level out at $12.50, with a target high of $13.50. This would push it to a 22 times price to earnings ratio, while its $13.50 high would see the company trading at 16.5 times.
JB Hi-Fi was one of the only stocks to rise yesterday, despite the overall market losing another $40 billion or so. However, the retailer was down as much as eight per cent today, recovering to just under three per cent at time of writing.
McLennan mirrored Gerry Harvey’s comments on the ecomomy, though, saying the fundamentals of the Australian economy “remain supportive of consumer spending”, and that JB Hi-Fi remained in a sweet spot, thanks to its “store growth profile, high growth categories and the continued consolidation of the consumer electrical sector in Australia.”
“We believe recent share price sell-off is in contrast to the companies’ outlook and provides an attractive entry point into the stock. However, our forecast 12-month return for JBH of 16.8% remains well below Credit Suisse’s forecast market return of 28%, keeping our rating on JBH at Underperform,” McLennan said.