The JB Hi-Fi share price has tumbled 19% in a month. What’s next?

Are JB Hi-Fi shares now in the bargain bucket? Brokers weigh up the situation.

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Key points

  • Brokers have been considering whether it’s time to go shopping for JB Hi-Fi shares 
  • Macquarie thinks we’re heading into a difficult time for retailers like JB Hi-Fi. That's why it has an ‘underperform’ rating 
  • However, other brokers have much more optimistic price targets, taking into account the sales growth in the latest reported quarter 

The JB Hi-Fi Limited (ASX: JBH) share price has been suffering in recent weeks, just like most of the rest of the S&P/ASX 200 Index (ASX: XJO).

In just one month, JB Hi-Fi shares have fallen almost 20%. That means the JB Hi-Fi market capitalisation has lost an entire fifth of its value – the entire business is now valued at $4.3 billion according to the ASX.

What happens next?

I wish I knew. It would make investing a lot easier! Sadly, my time machine isn’t working yet.

There has been a lot of volatility. With the ongoing strength of inflation, there could be more volatility to come.

But, specifically on the JB Hi-Fi share price, market sentiment has declined. Is this lower price an opportunity? Let’s look at what some of the leading brokers are thinking.

Ratings on the JB Hi-Fi share price

Macquarie recently downgraded its rating on the business to underperform from outperform, citing the negative outlook regarding the consumer because of the high level of inflation and rising interest rates, as well as a redirection of household spending to other categories. Macquarie’s price target is $40.90.

The broker points out that a lot of households bought new gadgets and appliances over the last two years, so the shorter-term spending on those categories is likely to be lower. While Macquarie thinks JB Hi-Fi is a great ASX retail share, it believes the economic conditions will be challenging.

Citi is more optimistic about things for the JB Hi-Fi share price, with a price target of $53. However, the current rating is neutral. But that does imply a possible rise of more than 30%. While acknowledging the worsening economic conditions, the broker thinks things still look reasonable for the retail sector.

Another broker, UBS, is also neutral on the business. It noted the latest trading update, showing growth for the business.

Latest trading update

The company announced last month the performance for the three months to 31 March 2022.

For that quarter, JB Hi-Fi Australia sales went up 11.9% year on year, JB Hi-Fi New Zealand sales were up 4.8% year on year and The Good Guys sales went up 5.5% year on year.

JB Hi-Fi share price valuation

Macquarie thinks that JB Hi-Fi shares are valued at under 10 times FY22’s estimated earnings and 11 times FY23’s estimated earnings.

Citi has estimates for a bigger profit by the ASX retail share. This broker’s projections put the JB Hi-Fi share price at 9 times FY22’s estimated earnings and 10 times FY23’s estimated earnings.

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Tristan Harrison 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 recommended Macquarie Group Limited. 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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