Why the JB Hi-Fi share price rocketed 13% higher on Monday

The JB Hi-Fi Limited (ASX:JBH) share price rocketed higher on Monday. Here's why the retailer's shares rose 13%…

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The JB Hi-Fi Limited (ASX: JBH) share price certainly started the week with a bang on Monday.

The retailer's shares finished the day 10% higher but at one stage was up as much as 13% to an all-time high of $31.60.

Why did the JB Hi-Fi share price rocket 13% higher on Monday?

Investors were buying the retailer's shares on Monday after it posted a stronger than expected full year result.

In FY 2019 JB Hi-Fi recorded a 3.5% increase in revenue to $7.095.3 million, a 6.4% lift in earnings before interest and tax (EBIT) to $372.8 million, and a 7.1% lift in profit after tax to $249.8 million.

As a comparison, analysts at Goldman Sachs were expecting JB Hi-Fi to report EBIT of $362.3 million in FY 2019. And as they were amongst the most bullish analysts, this clearly was a solid profit result.

This strong result was driven largely by the company's JB Hi-Fi Australia business. It reported a 4.1% increase in sales and a 2.6% lift in EBITDA.

Supporting this growth was the JB Hi-Fi New Zealand business which posted a 2% increase in sales and a 56.1% jump in EBITDA and The Good Guys business which posted sales growth of 2.2% and EBITDA growth of 10.6%.

What else caused the share price rise?

As I mentioned here on Monday, JB Hi-Fi is one of the most shorted shares on the Australian share market. At the last count, the retailer had 14.2% of its shares held short.

This means that 14.2% of its shares are held by short sellers who are betting that they will decrease in value.

This could mean that a "short squeeze" occurred on Monday following the release of JB Hi-Fi's strong profit result.

Investopedia defines a short squeeze as "a situation in which a heavily shorted stock or commodity moves sharply higher, forcing short sellers to close out their short positions and adding to the upward pressure on the stock. Short sellers are being squeezed out of their short positions, usually at a loss."

Short sellers have had a lot of luck with the likes of Syrah Resources Ltd (ASX: SYR) and Orocobre Limited (ASX: ORE) this year, but this may be one shares that they regret targeting.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Gainers

Two happy excited friends in euphoria mood after winning in a bet with a smartphone in hand.
Share Gainers

Why Fortescue, Lynas, PEXA, and Regis Healthcare shares are charging higher

These shares are having a strong session on Thursday. But why?

Read more »

A young man talks tech on his phone while looking at a laptop. A financial graph is superimposed across the image.
Share Gainers

Why Capricorn Metals, Insignia, Perseus Mining, and Qoria shares are storming higher

These shares are having a strong session on Tuesday. But why?

Read more »

A man clenches his fists in excitement as gold coins fall from the sky.
Share Gainers

Why Amaero, AMP, Block, and South32 shares are racing higher today

These shares are starting the week on a positive note. But why?

Read more »

Ten happy friends leaping in the air outdoors.
Share Gainers

Here are the top 10 ASX 200 shares today

It was another momentous session for ASX shares this Friday.

Read more »

Overjoyed man celebrating success with yes gesture after getting some good news on mobile.
Share Gainers

Why BHP, Catalyst Metals, Mesoblast, and Pilbara Minerals shares are shooting higher

These shares are ending the week with a bang. But why?

Read more »

Doctor doing a telemedicine using laptop at a medical clinic
Healthcare Shares

The Mesoblast share price just rocketed 38%! Here's why

ASX investors just sent the Mesoblast share price up 38%. But why?

Read more »

A businessman stacks building blocks.
Share Gainers

Here are the top 10 ASX 200 shares today

ASX shares hit a new record high today.

Read more »

A man sees some good news on his phone and gives a little cheer.
Share Gainers

Why Auckland Airport, Australian Ethical, Breville, and Clarity shares are charging higher

These shares are having a better day than most on Thursday. But why?

Read more »