If you are looking for exposure to the furniture market, there are a couple of key ways to do it on the Australian share market.
You have bricks and mortar retailer Nick Scali Limited (ASX: NCK) and online retailer Temple & Webster Group Ltd (ASX: TPW).
But if you were to buy only one of these shares, should it be Nick Scali or Temple & Webster? Let's see what analysts at Macquarie Group Ltd (ASX: MQG) are saying about the two.
Image source: Getty Images
Does Macquarie prefer Nick Scali or Temple & Webster shares?
According to a note out of the investment bank this morning, the broker remains positive on both ASX shares.
However, due to current valuations, there is one in particular that Macquarie thinks is a buy above the other.
Commenting on the retail sector, Macquarie named Nick Scali as one of its key picks based on high frequency consumer data. It said:
We have Outperform recommendations on both COL and WOW, with the data suggesting an improvement in the topline through the last quarter of the year (important in offsetting cost pressures which are a growing concern). The data is incrementally positive for HVN given the "whole-of-home" exposure and potential slowing in Electronics. Similarly in SMIDs, we retain our preference for NCK, with an improvement in furniture spend domestically and further GM% upside driven by opportunities in the UK.
According to the note, Macquarie has retained its outperform rating and $19.90 price target on Nick Scali's shares.
Based on its current share price of $18.20, this implies potential upside of 9.3% for investors over the next 12 months.
In addition, Macquarie is forecasting fully franked dividends of 54 cents per share in FY 2025 and then 66 cents in FY 2026. This equates to dividend yields of 3% and 3.6%, respectively, which boosts the total potential return to over 12%.
What about Temple & Webster?
Macquarie currently has an outperform rating on Temple & Webster's shares. However, due to an impressive 60% rise this year, they are now trading ahead of its price target.
The note reveals that the broker has a price target of $17.60. This suggests that there is potential downside of 15% from its current share price of $20.82.
Though, it is worth noting that Morgan Stanley is more positive. It has an outperform rating and $28.00 price target on its shares. This implies potential upside of almost 35% for investors from current levels.
