Why the JB Hi-Fi (ASX:JBH) share price could soar into Christmas

JB Hi-Fi shareholders have enjoyed a rewarding year to date. Here’s why the next 3 months could deliver more good news for the JB share price…

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JB Hi-Fi share price upgrade A cool older dude with a long grey beard holds a hi-fi stereo on his shoulder.

Image source: Getty Images

The JB Hi-Fi Limited (ASX: JBH) share price is up 23% so far in 2020, even after sliding 10% from its 25 August all-time highs. Despite its unique spot in the retailing world, with a large online footprint, the JB share price did not escape the wider selling that gripped the market in the early days of the pandemic. From 10 February through to 25 March the JB share price fell 47%.

Since that low, the share price has doubled, up 100%. That strong performance puts the company’s shares up 23% year to date. By comparison, the S&P/ASX 200 Index (ASX: XJO) is down 11% in 2020.

What does JB Hi-Fi do?

JB Hi-Fi is a consumer goods retailer. The company’s products include a range of home entertainment, gaming, music and IT products as well as white goods and home appliances. JB has made several acquisitions over the years, including acquiring The Good Guys in 2016.

JB Hi-Fi has over 300 stores across Australia and New Zealand. The company also operates online stores in both markets. JB Hi-Fi first began trading on the ASX in 2003. Today, the company has a market capitalisation of $5.4 billion and pays an annual dividend yield of 4%, fully franked.

Why the JB share price could run higher into Christmas

There are good reasons to believe that JB Hi-Fi’s share price could top the record high set on 25 August. That would represent a gain of 11% or more from today’s price of $47.04 per share (at the time of writing).

First, it’s a well managed company with strong sales growth. Total sales growth in the 2020 financial year came in at 11.6%. And the 2021 financial year is off to a good start, with the company reporting total sales growth in its Australian businesses of 42% in July, the first month of the new financial year.

Then there’s the government’s new, big spending budget, the finer details of which will be released shortly. Among the other spending packages, the budget is bringing forward the government’s stage 2 income tax cuts, and making them retroactive.

This, alongside other stimulus measures to support businesses and households, is going to put a lot of unexpected money into most households’ pockets. And with the Christmas season coming up, I expect COVID weary consumers will be looking to spend big to usher in the holiday cheer.

All this could spell a big uptick in the JB Hi-Fi share price.

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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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