JB Hi-Fi Ltd (ASX: JBH) shares have rallied 22.37% since the start of 2024. However, the S&P/ASX 200 Index (ASX: XJO) has only gone up 4.61% this year. One broker thinks the ASX retail share has more to climb in the coming months.
The company runs three different businesses – JB Hi-Fi Australia, JB Hi-Fi New Zealand and The Good Guys. It sells a variety of different products including smartphones, appliances, TVs and computers.
Technology is always changing and a new invention can spur businesses and households to invest in some new devices. An incoming wave of products could deliver an exciting boost to earnings, according to one expert.
AI PCs to revitalise the industry?
According to reporting by The Australian, Adrian Lemme from the broker Citi thinks AI PCs are going to be a positive for JB Hi-Fi shares and "reinforce FY25 earnings upside".
The newspaper reported that Adrian Lemme said:
The PC industry is set to see a rebound over the next two years as higher unit growth coincides with higher ASPs (application service providers) underpinned by the release of AI PCs.
JB Hi-Fi is the Australian computer market leader with about 15-20 per cent of its sales and therefore stands to be the biggest beneficiary.
The broker suggested that the projections by a consensus of market analysts don't appear to include many if any, AI-related benefits. Lemme has a price target of $74 on the business, implying a possible rise of 11% over the next year.
Lemme pointed out that the market consensus for earnings before interest and tax (EBIT) suggests the profit measure will be flat in FY25 compared to FY24, while Citi is forecasting that JB Hi-Fi's EBIT could grow by 7% year over year.
For example, the broker UBS currently estimates that JB Hi-Fi could generate EBIT of $609 million in FY24 and then $608 million in FY25. UBS is expecting the JB Hi-Fi dividend per share to decline to $2.45 in FY24 and then fall further to $2.41 in FY25.
Consumers remaining resilient?
However, UBS did note that the Australian consumer, on average, has "managed rising cost of living pressures by being more discerning and trading down in food", apparel and general merchandise, and big-ticket items.
UBS also said aggregate retail sales growth has been resilient, despite consumers being more discerning, because of three factors: population growth (with JB Hi-Fi being a "key" beneficiary), a strong labour market, and "a buoyant baby boomer & property-owning consumer."
The broker said that it prefers companies with "exposure to older and younger consumers (teens, non-renters), affluent consumers, beneficiaries of trade down", and some company-specific stories enjoying sales resilience and/or undemanding comparable sales (from last year) and valuations.
While UBS may not be that bullish about JB Hi-Fi shares, the broker is positive on the overall landscape for some ASX retail shares.
