The Harvey Norman Holdings Limited (ASX: HVN) share price could still have room to grow according to one leading broker.
Who is positive on Harvey Norman?
A note out of Goldman Sachs this morning revealed that its analysts have retained their buy rating and put a $4.90 price target on this retail giant's shares following the release of its annual general meeting update yesterday.
That update revealed that Harvey Norman's aggregated sales revenue increased by 28.2% between 1 July and 21 November compared to the prior corresponding period. This has been driven by strong same store sales growth across almost all regions over the period.
Things were even better on the bottom line. Thanks to margin expansion, the company's unaudited profit before tax for the period 1 July to 31 October was up a massive 160.1% on the prior corresponding period.
Goldman believes the company's growth will inevitably slow in the second half but has increased its forecasts to account for stronger than expected sales trends and operating leverage.
It said: "We maintain our expectations that the strong growth seen over 2H20 and into 1H21 is unlikely to be sustained once the industry starts to cycle through the strong base in 2H21."
"However, we revise sales forecasts to reflect the stronger ongoing sales trend and operating leverage resulting in EBIT revisions of +28.7% in FY21, but less significantly at +3.1% in FY22. Our revised PBT forecasts imply growth of +75.7% over the more significant Nov/Dec period, after +185.9% in Jul/Aug and +136.7% in Sep/Oct," Goldman added.
Why buy Harvey Norman shares?
The broker sees Harvey Norman as a great option for income investors due to its generous yield.
It explained: "[its target price] now offering a potential total return of 15.7% driven by strong dividend yield support. We forecast HVN is trading at 13.8x PE and offers a 6.5% fully franked dividend yield in FY22. We maintain our Buy rating on HVN and the stock remains a preferred exposure in the discretionary retail sector."
