Is the Harvey Norman (ASX:HVN) share price dirt cheap?

Is it time to buy this retail giant’s shares?

| More on:
A young woman in a retail shop holding her wallet open ready to pay for her items using Afterpay

Image source: Getty Images

The Harvey Norman Holdings Limited (ASX: HVN) share price has been out of form in recent months.

Since peaking at a 52-week high of $6.09 in August, the retail giant’s shares have fallen 17% to $5.05.

Is the Harvey Norman share price weakness a buying opportunity?

One leading broker that sees the weakness in the Harvey Norman share price as a buying opportunity is Goldman Sachs.

According to a note this morning, the broker has retained its buy rating and $6.00 price target on the company’s shares. Based on the current Harvey Norman share price, this implies potential upside of almost 19% over the next 12 months.

In addition, the broker is forecasting a 36 cents per share fully franked dividend in FY 2022. This implies a very generous 7.1% yield, bringing the total potential return on offer to 26%.

What did the broker say?

Goldman notes that Harvey Norman has recently released a trading update which revealed positive growth year to date in all regions outside of Malaysia versus the comparable period in 2019.

Overall, the trading update was largely in line with the broker’s expectations, with sales trends in Australia and Europe remaining slightly ahead of expectations and Asia remaining weaker.

Pleasingly, the broker expects this positive form to continue due to favourable trading conditions.

Its analysts commented: “We update our earnings outlook on HVN to reflect the latest trading update. We continue to expect the underlying sales growth vs. pre-COVID levels to remain strong due to the positive housing related spending environment and an overall expected increase in spending for the home category. Additionally, we also update our FX forecasts for HVN, in line with the latest GSe. Overall, this results in a revision of group EBIT outlook by +0.1% and +0.8% respectively over FY22 and FY23e respectively. Our 12m Target Price for HVN remains unchanged at A$6.00 and we maintain a Buy rating on HVN.”

Should you invest $1,000 in Harvey Norman right now?

Before you consider Harvey Norman, you'll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Harvey Norman wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of January 13th 2022

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 owns shares of and has recommended Harvey Norman Holdings Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Broker Notes