Analysts at UBS have expressed optimism regarding the future performance of JB Hi-Fi Ltd (ASX: JBH), particularly following a strong trading performance that saw the share price rise by around 15% over the last three trading days. The Australian retailer reported a 7.3% increase in sales, reaching $6.1 billion, alongside an 8.1% rise in operating profit (EBIT) to $454 million. Earnings per share (EPS) also climbed 7.1% to $2.80, while the annual dividend per share surged 23.5% to $2.10.
The results exceeded UBS’s expectations, alleviating market concerns over potential growth challenges following a robust second quarter of FY25. The firm noted that worries about JB Hi-Fi’s ability to sustain growth “did not materialise.” In particular, the performance of The Good Guys, a subsidiary of JB Hi-Fi, was noted for its stronger-than-anticipated EBIT, attributed to effective promotional strategies.
Strong Financial Performance and Future Projections
UBS highlighted that The Good Guys’ EBIT margin improved due to a combination of a higher gross profit margin and a reduced cost of doing business relative to sales. JB Hi-Fi Australia also performed better than expected, thanks in part to its adaptable cost structure, which allows the company to adjust to any downturns in sales.
As a result of these robust figures, UBS has raised its forecast for JB Hi-Fi’s EPS by 5.6% and 5.3%. This revision reflects an anticipated increase in sales and a more favorable EBIT margin for The Good Guys. Although there are lower projections for the JB Hi-Fi New Zealand and E&S divisions, these segments represent a smaller portion of the overall business.
Investment Outlook and Price Target
UBS has classified the share price of JB Hi-Fi as a buy, setting a price target of $94, which suggests a potential increase of approximately 7% over the next year. The broker noted that the price-to-earnings (P/E) ratio for JB Hi-Fi has decreased in recent months; however, it remains higher than figures observed a decade ago. UBS believes this valuation is justified due to the company’s position as a large, growing entity with an expandable total addressable market (TAM).
The firm also pointed out that JB Hi-Fi is gaining market share, effectively manages costs, and is prudent in capital management. UBS suggested that the company can be increasingly compared to other businesses with higher P/E multiples, such as Wesfarmers Ltd (ASX: WES), which operates retail divisions like Bunnings and Kmart.
In conclusion, given the positive share price performance, the strong first-half results for 2026, and the confidence in JB Hi-Fi’s capacity to achieve a higher earnings multiple compared to its historical performance, UBS has upgraded its recommendation from Neutral to Buy.
