The Harvey Norman Holdings Limited (ASX: HVN) share price plunged 3.23% to a new three-year low of $3.30 yesterday.
The iconic retailer has been struggling since the release of its 1H FY23 results on 28 February.
In fact, the Harvey Norman share price has taken a 20% dive since the company revealed a 15.1% decline in reported net profit after tax (NPAT) and slashed its interim dividend by 35%.
Ask Gerry if it’s a buy …
It’s a pretty safe bet that company co-founder Gerry Harvey would be telling you to buy today.
That’s because he went on a $76 million buying spree with his own money back in March when the ASX retail share was trading in the $3.70 range.
If Harvey Norman stock was a buy then, he’d surely be calling it a buy today with the share price more than 10% lower!
As we reported back in March, Harvey felt investors had overreacted to the 1H results. They sent the Harvey Norman share price down by as much as 12% on the day.
Harvey said:
Harvey Norman is on a 6 per cent dividend yield, or better, at $4 a share and we only paid out half (our earnings) in dividend; if we paid out the lot it would be a 12 per cent dividend fully franked. We have a wonderful record of paying dividends over 35 years.
We’ve got a long record that’s very, very good and so the market … should be delighted, not disappointed.
Regardless, Harvey enthusiastically took advantage of this ‘total overreaction’ and bought that dip.
Is the Harvey Norman share price inspiring the brokers?
Goldman Sachs reckons Harvey Norman shares are a buy, particularly for income investors.
The top broker reckons the Harvey Norman share price will rise to $4.70 within 12 months.
As my Fool colleague James reports, Goldman believes Harvey Norman can withstand increasing online competition due to its established regional network and older customer base.
Goldman notes that “Harvey Norman holds a unique position within the electronics and appliances retail industry as a result of its franchise model of operations in Australia, property portfolio and regional exposure”.
Goldman expects Harvey Norman shares to pay fully franked dividends of 36 cents in FY23, 30 cents in FY24, and 36 cents in FY25.
Based on the new three-year low price, this implies huge yields of 10.9% in FY23 and FY25 and 9.1% in FY24.
What do we Fools think?
My colleagues Mitch and Tristan duked it out a fortnight ago in another of our Bull vs Bear stories.
Mitch likes the company’s solid 40-year history and strong franchise business model. He also notes the substantial real estate portfolio on the retailer’s books.
That portfolio is actually enormous, by the way. It’s worth $3.9 billion on its own. What’s even more significant is that this represents 92% of the company’s current $4.24 billion market capitalisation.
Did someone say KFC? (that is, great value)…
Tristan reckons the Harvey Norman share price could fall further once interest rates really start to bite.
Retail spending is only just starting to cool now — more than a year after the Reserve Bank (RBA) began hiking the cash rate. We are likely only just beginning to see the impact on ASX retail shares today.
As well, the RBA lifted the cash rate again by 25 basis points to 4.1% yesterday afternoon.
Another colleague, Brooke, reckons Harvey Norman is among the best passive income shares to buy this month.
