Is the JB Hi-Fi (ASX: JBH) share price in the buy zone after its update?

Should you be buying this retail giant’s shares?

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The JB Hi-Fi Limited (ASX: JBH) share price is edging lower on Wednesday afternoon.

At the time of writing, the retail giant’s shares are down 0.2% to $49.41.

Why is the JB Hi-Fi share price edging lower?

The softness in the JB Hi-Fi share price on Wednesday appears to have been driven by the release of a number of mixed broker notes. This follows the release of the company’s full year update yesterday.

In case you missed it, JB Hi-Fi outperformed the market’s expectations. It reported a 12.6% increase in sales to $8.9 billion and a 67.4% jump in net profit after tax to $506.1 million. The latter was driven by operating leverage thanks to improvements in gross margins and strong cost control.

What was the response?

The general response was the company had a fantastic 12 months but that it is unlikely to repeat these heroics in FY 2022. As such, the JB Hi-Fi share price is fully valued now.

One broker that feels this way is Goldman Sachs. According to a note, the broker was impressed with the company’s performance but has held firm with its neutral rating and lifted its price target slightly to $49.40.

It said: “JBH pre-announced FY21 results, reporting sales at A$8,916.1mn, +0.3% vs. GSe and +0.1% vs. Visible Alpha Consensus Data and EBIT at A$743.2mn, +2% vs. GSe and +4.7% vs. consensus. The key upside surprise in this announcement was the continued strength in momentum for The Good Guys division, reporting EBIT +8.6% vs. GSe and Visible Alpha Consensus Data.”

However, Goldman believes the current sales and margin strength is unsustainable and expects earnings declines in FY 2022 and then again FY 2023.

What else did brokers say?

The same sentiment was echoed over at Bell Potter. Its analysts have held firm with their neutral rating and lifted their price target to $46.50. This compares to the current JB Hi-Fi share price of $49.41.

Bell Potter commented: “We have updated our FY21 with pre-audit actuals and rolled forward our model. Net effect is our FY21/FY22e EPS increase by 15%/3.7%. Our PT increases to $46.50 (previously $45.50). Based on valuation on a normalised base and increased near-term uncertainties (as a result of COVID), we retain our Hold rating.”

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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