JB Hi-Fi Limited down 30% in 6 months: Is this a juicy bargain to snap up?

Could new Apple iPads and Apple Watches give the electronics retailer a boost from here?

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Retailers like JB Hi-Fi Limited (ASX: JBH) are still seeing no relief as retail trade in general is down at low levels compared to the last Christmas shopping season. Earlier expectations that a new Liberal government might be good for business have not manifested an economic lift yet.

JB Hi-Fi's products like electronics, small appliances and white goods have been supported by a rising housing market, but even the retailing trend for household goods has flattened out since mid-2014.

Household Goods Retailing

household goods retailing trend chart

 

 

 

 

 

Source: ABS

Apple to the rescue?

One tailwind that the retailer may have is the upcoming launch of new Apple products. Following the iPhone 6 release last month, this week's Apple event may reveal a new iPad, Macbook PC and more information about the new Apple Pay mobile payment platform. The Apple Watch, which should have Apple Pay capabilities, could also be soon released in Australia. These products could bring shoppers back into JB Hi-Fi.

It would be unreasonable to expect this alone will pull up the company. However, with JB Hi-Fi saying in its annual report it projects 6% sales growth in FY 2015, new Apple products could give it a boost.

Slowing housing market could gather momentum

As we anxiously await this outcome, the housing market may be losing some of its steam after a heated run up in property prices. As someone who has watched property markets for some time, I wouldn't think it is over, but just a little breather before the next leg up starts.

In a low interest rate environment, the incentive to buy property is still present. JB Hi-Fi could see a stronger pick-up in sales over the next 1 – 2 years as the effects of a rising housing market filter through the economy.

Where JB Hi-Fi is now

The company's stock is now down about 30% over the past six months, around $14.50 a share. It hit a new low not seen since March 2013. I believe it still has more to fall – possibly to the $13 – $14 range – before it bottoms out. If correct, that could be another 4% – 10% decline. Investors should add the stock to their "buy" watchlist, but wait for this knife to hit bottom before picking it up.

Even though the stock has a dividend yield of 5.9% fully franked, some investors may feel that retail is not the strongest place to be right now. In that case, one tech company in a new, growing field may be the one to give you the growth you're looking for.

 

Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. 

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