The Harvey Norman Holdings Limited (ASX: HVN) share price is pushing higher on Monday morning.
At the time of writing, the retail giant's shares are up over 1% to $5.31.
This latest gain means the Harvey Norman share price is now up 47% over the last 12 months.
Can the Harvey Norman share price go higher?
According to a note out of Goldman Sachs, its analysts believe the Harvey Norman share price may have peaked now.
This morning the broker downgraded the company's shares to a neutral rating with an improved price target of $5.10.
This price target is around 4% lower than where the Harvey Norman share price is currently trading.
What did Goldman Sachs say?
Goldman Sachs was pleased with Harvey Norman's performance during the first half of FY 2021. However, it fears that the peak trading it is experiencing is unlikely to be sustainable.
It commented: "While conditions were still patchy and unpredictable in parts due to the pandemic, HVN benefited substantially from the shift in spending by consumers on products and activities around the home over 1H21 and it managed the business well under volatile, but strong trading conditions. A key highlight was the expansion in its EBITDA margin by 450bps to 10.9% of system sales (on a pre AASB16 equivalent), which compares to previous peaks of ~8% historically."
"While the housing cycle is likely to provide some buffer to the earnings outlook over FY22 and FY23, the peak trading seen in the June quarter 2020 to March quarter 2021 are unlikely to be sustained, in our view. Despite the upgrade, we forecast FY22 EBIT to decline 30% on FY21."
Earnings to decline after FY 2021
As a result of the above, the broker is forecasting declines earnings in FY 2022 and FY 2023. Goldman has forecast earnings per share of 57 cents in FY 2021 and then 39 cents and 38 cents, respectively, in the following two years.
In light of this, it doesn't believe its shares offer enough value for money at this point.
It explained: "Despite HVN's valuation remaining reasonable versus our price target and historical PE range, after outperforming the market by c. 21% YTD, we are downgrading HVN to Neutral. HVN's property adjusted FY22E P/E is now at 9.2x, ahead of its longer-term average of 8.7x and well ahead of the 6.1x at the beginning of this FY."
