Treasure Chest: JB Hi-Fi

This story features JB HI-FI LIMITED, and other companies. For more info SHARE ANALYSIS: JBH

FNArena’s Treasure Chest reports on money making ideas from stockbrokers and other experts.

By Rudi Filapek-Vandyck

Whose Idea Is It?

Analysts at Citi

The subject:

Following two years of double-digit declines in PC sales, 2025 is shaping up as a year of strong upward momentum. Citi has upgraded its price target for JB Hi-Fi ((JBH)) to $74 in anticipation. JB Hi-Fi is the market leader in the Australian computer market.

The thesis

Citi analysts have identified multiple drivers to underpin a strong recovery for PC sales in 2025, including Microsoft ceasing support for Windows 10, the replacement cycle kicking in from peak sales in 2021 (covid lockdowns) and the fresh new series of products with artificial intelligence embedded.

More info:

JB Hi-Fi is the market leader for PC sales and adjacent electronics in Australia and should thus be a major beneficiary of next year’s upswing in PC sales. Another identified beneficiary is Harvey Norman ((HVN)).

On Citi’s assessment, the next industry upturn will include both increased volumes and higher pricing as AI-PCs carry a higher price tag. All top consumer PC brands have announced a series of AI PCs to be released over 2024, the broker notes.

The expectation is that PC sales will experience a mild uptick in 2024 (low to single digit market growth) with growth to accelerate to 8-10% in 2025. Some experts estimate AI PC’s could command 5-15% higher prices.

Beyond AI-enabled PCs, there are other technologies that are equally benefiting from being AI enabled, the analysts highlight, including gaming PCs powered by Nvidia gaming chips and smartphones, such as the Samsung S24 Galaxy.

It is the broker’s observation this upside potential is not yet reflected in consensus forecasts. The implication is the re-rating of JB Hi-Fi shares since November last year has at least another chapter in it on enlarged growth potential in FY25-FY26.

Citi has reiterated its Buy rating with an increased price target of $74, which catapults the broker to the top of the market in FNArena’s universe. If we ignore laggard Ord Minnett, targets set by Citi’s peers are currently in the high $50s-mid-$60s.

The suggestion that a new upswing awaits for sellers of PCs, smart mobiles and related hardwares is not new. Already, FNArena’s Special Report on Investing in Gen.Ai, The Next Industrial Revolution mentions companies like Wesfarmers ((WES)), through Officeworks, Dicker Data ((DDR)) and Data#3 ((DTL)) as other potential beneficiaries.

Analysts at Macquarie earlier calculated if Gen.Ai is to shorten the average renewal cycle for computers by one year (to five instead of six) this would increase the market overall by 34% in 2025, also assuming an average price increase of 15%.

Paying subscribers can download their copy of this Report via the SPECIAL REPORTS section on the website.

Citi’s latest research update has more promising input for JB Hi-Fi shareholders: on top of the anticipated recovery in PCs, industry feedback suggests appliances are doing better and the TV market is flattening after a period of significant decline post the covid peak.

The five daily monitored brokers (ex Citi) are either Hold/Neutral or Sell rated on JB Hi-Fi but Citi seems fairly confident they will cross the boundary to the ‘other side’. Two brokers not daily covered are Goldman Sachs and Jarden, both with a price target of $50.

JB Hi-Hi shares fell towards $56 in late May, but have since recovered strongly and are this week trading in the mid-$60s. This time last year they were languishing in the low-$40s.

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