Harvey Norman shares climb as analysts hike price targets
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The news: Shares in Harvey Norman extended gains from Friday after its better-than-expected first-half result triggered upgrades by a number of analysts.
The numbers: Harvey Norman shares were up 4.2% to $5.44 at midday AEDT, having closed 2.6% higher on Friday.
Analysts made the following upgrades to their price targets on the stock:
- UBS: Up 5% to $5.25
- Citi: Up 11.5% to $5.80
- Macquarie: Up 6% to $5.50
The context: Macquarie analysts said they expect Harvey Norman's sales momentum to continue across the business, initially driven by electronics, with other housing-related categories to improve throughout the calendar year.
They noted that the "key highlight" of the half-year result was the strong performance in Harvey Norman's Australian franchisee business, with profit before tax increasing 26% year on year.
Citi analysts also flagged the better-than-expected franchise segment, with earnings coming in 5% ahead of consensus estimates, and offsetting start-up losses in the UK that weighed on the international result.
The analysts expect that further rate cuts will likely stimulate sales in Harvey Norman's higher-margin furniture and bedding categories.
The sources: UBS research, Citi research, Macquarie research
