The JB Hi-Fi Limited (ASX: JBH) share price has been a strong performer over the last six weeks.
Since dropping as low as $20.79 in mid to late March, the retail giant's shares have rallied an impressive 66% higher.
Despite this strong recovery, its shares are still down 25% from the 52-week high they reached in February.
Is the JB Hi-Fi share price in the buy zone?
I think JB Hi-Fi's shares are about fair value at the current level, so I'm not in a rush to invest.
Especially with the all-important end of financial year sales period on the horizon.
JB Hi-Fi's performance during the pandemic has been very impressive, but there is a lot of uncertainty around whether this will be maintained in the coming quarters.
With its update this week, management noted that its sales surge during the third quarter was driven by increasing demand due to working and entertaining at home.
With Australia now flattening the curve and workers likely to be returning to offices in the near future, there are concerns that this, housing market weakness, and rising unemployment could dampen demand in the near term.
One broker that is sitting on the fence with JB Hi-Fi is Goldman Sachs.
According to a note out of the broker this morning, its analysts have retained their neutral rating and lifted the price target on its shares to $35.50.
Although the broker is expecting a strong result in FY 2020, it appears to believe a cyclical downturn will weigh on its performance next year.
It has forecast full year EBIT of $403.8 million in FY 2020, up from $372.9 million a year earlier. But in FY 2021 it expects its EBIT to decline to $350.7 million. This translates as earnings per share of 237.7 cents in FY 2020 and 206.9 cents in FY 2021.
Based on this estimate, JB Hi-Fi's shares are changing hands at 17x forward earnings. Which I feel is about right given its outlook.
In light of this, I see more value in retail shares such as Accent Group Ltd (ASX: AX1) and Premier Investments Limited (ASX: PMV) and would buy them ahead of JB Hi-Fi.
