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Down 20% in a month: Top broker tips 75% upside for the Adairs share price

Adairs’ shares are down 20% in a month. Is this a buying opportunity?
The post Down 20% in a month: Top broker tips 75% upside for the Adairs share price appeared first on The Motley Fool Australia. –

The Adairs Ltd (ASX: ADH) share price has continued its slide and hit a new two-year low this afternoon.

The furniture and homewares retailer’s shares are currently down almost 4% to $1.98.

This means the Adairs share price is now down 20% in the space of a month.

Is the Adairs share price weakness a buying opportunity?

While it is impossible to say when the company’s shares will finally reach a bottom, one leading broker is likely to see the recent weakness as a buying opportunity.

A note out of Morgans reveals that its analysts have an add rating and $3.50 price target on the company’s shares.

Based on the current Adairs share price, this implies potential upside of over 75% for investors over the next 12 months.

But it gets better. At present, Morgans is forecasting fully franked dividends of 19 cents in FY 2022 and 26 cents in FY 2023. This implies yields of 9.6% and 13.1%, respectively, over the two financial years.

What is the broker saying about Adairs?

According to the note, Morgans acknowledges that Adairs’ first half performance was impact by COVID disruptions.

However, it expects things to improve in the second half and remains positive on the company’s outlook. This is due to its Focus on Furniture acquisition, the Mocka business’ omni-channel strategy, and the new national distribution centre (NDC).

It said:

In FY23, we expect Focus to have bedded down and to have started a strategy of improving store economics while expanding its footprint. We expect the NDC to be up and running and delivering efficiencies. We expect Mocka to be making its first steps towards an omni-channel strategy.

These factors underpin an expectation of positive earnings growth in FY23 and FY24, which we do not think are reflected in the multiple.

Though, it is worth noting that the broker concedes that there are risks to its estimates. These risks include a faster-than-expected downturn in consumer spending on furniture and homewares and the failure to achieve the rollout of Focus stores. Something to consider given rising inflation and interest rates.

The post Down 20% in a month: Top broker tips 75% upside for the Adairs share price appeared first on The Motley Fool Australia.

Should you invest $1,000 in Adairs right now?

Before you consider Adairs, you’ll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Adairs wasn’t one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of January 13th 2022

More reading

What’s on the horizon for the Adairs share price in June?
2 ASX dividend shares that experts are tipping as buys right now
Why was May such a shocker for the Adairs share price?
3 high-quality ASX 300 shares trading at 52-week lows today
3 key reasons why I think the Adairs share price is a buy

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended ADAIRS FPO. The Motley Fool Australia has positions in and has recommended ADAIRS FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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