Wanting exposure to the retail sector? Then it could pay to listen to what analysts at Bell Potter are saying.
The broker has just named two ASX retail stocks to buy and two to hold. Let's see what the broker is recommending.
What is the broker saying about ASX retail stocks?
Bell Potter has been looking into consumer electronics and home improvement trends. In respect to the former, the broker sees some positive tailwinds emerging. It said:
Our analysis into the three key markets of interest, Australia, US and UK sees some recovering signs emerging in categories such as Consumer Electronics as trends of closing out of the multi-year pull forward demand is somewhat evident and technology led spend continues to win a larger share of the consumer wallet.
Bell Potter also believes that artificial intelligence (AI) could be a key driver of sales. This could be good news for the likes of Harvey Norman Holdings Limited (ASX: HVN), JB Hi-Fi Ltd (ASX: JBH), and Kogan.com Ltd (ASX: KGN). The broker adds:
We also identify a sizable upside from the introduction of Artificial Intelligence (AI) features into mobile phone and personal computers to the consumer electronics retailers, JBH, HVN and KGN which we think is up to ~12%, ~12% and ~5% respectively in terms of the contribution to overall Australian sales at each retailer. We view them as being well positioned to benefit from an upgrade cycle of consumer electronics due in 2024-25 since the COVID driven previous peak in 2021 driven by AI enhancements.
Which stocks are buys?
Bell Potter believes that Harvey Norman and JB Hi-Fi are the ASX retail stocks to buy. It explains:
We view JBH and HVN as the key picks in our Consumer Electronics & Home Improvement coverage. We remain bullish on JBH as the market leader in Australia's consumer electronics retailing with a brand synonymous as a tech destination with consumers and with sector leading unit economics where we identity similarities to some of the best-in-class global business models such as Costco. We also prefer HVN given some unique characteristics as an integrated retailer and property owner with a leading competitive advantage as a franchisor/retailer while also having an insulated store network globally with ~40% owned by the group.
The broker has put a buy rating and $87.00 price target on JB Hi-Fi's shares and a buy rating and $5.80 price target on Harvey Norman's shares. This implies potential upside of 11% and 20%, respectively from current levels.
However, it thinks that Kogan shares are a hold with a $5.20 price target. Bell Potter has also initiated coverage on Adairs Ltd (ASX: ADH) with a hold rating and $2.00 price target.
