Harvey Norman Holdings (ASX: HVN) shares have had a relatively lacklustre week so far, currently up around 2.5% to trade at $7.41 at the time of writing. While positive, this is still in stark contrast to the rest of the year, which has been riveting for the retailer. Over the past year, Harvey Norman shares have climbed 66%.
A multitasking retailer
Harvey Norman is a multi-sided retailer that relies on three pillars: Australian franchise operations, 120 overseas stores in 7 countries, and a retail property portfolio comprising over 100 retail complexes in Australia and overseas. In August, the company reported a substantial increase in net income and earnings per share compared to the previous year, highlighting improved performance and stronger shareholder returns. The results exceeded analysts' expectations.
The retail sector is cyclical, but Harvey Norman sets itself apart from the competition with its $4.4 billion property portfolio. This adds value, but also provides the company and its shareholders with stability. The better than expected results combined with the diversified portfolio seem to have reignited confidence in Harvey Norman, as reflected in the stock's large price gains in the past 12 months.
Shopping surge
Historically, retail companies have experienced stronger earnings in the October-December quarter, as people tend to go on a shopping spree during the holiday season. This seasonal sales surge, combined with a more positive sentiment, can lead to an increase in the share price.
Over the past five years, the share price of Harvey Norman has experienced a surge in December, often referred to as a "Santa Rally" on the back of these seasonal trends. Only in the last month of 2021 did the Harvey Norman share price remain flat.
Can the dream run go on?
Many brokers believe that the Harvey Norman share is well-positioned to finish 2025 on a high. Analysts at UBS and Bell Potter are bullish on the retailer and increased their price targets to $7.75 and $8.30, respectively, an upside of 6% and 13% compared to the closing price on Thursday evening.
The brokers note that Harvey Norman's dream run can continue due to its undervaluation compared to peers like JB Hi-Fi Ltd (ASX: JBH), its property portfolio, and increased exposure to artificial intelligence (AI).
Sound dividend
Harvey Norman is also a good option for income investors due to the solid dividend yields the retailer offers its shareholders year after year.
Bell Potter is forecasting fully franked dividends of 30.9 cents per share in FY 2026 and 35.3 cents in FY 2027. Based on its current share price of $7.36, this would mean dividend yields of 4.2% and 4.8%, respectively. The predicted dividend yield for JB Hi-Fi for the same period is lower, up to 2.9%.
