On Thursday the Kogan.com Ltd (ASX: KGN) share price was one of the best performers on the Australian share market with an impressive gain of 22%.
Incredibly, the ecommerce company’s shares have built on this with another strong gain on Friday.
At the time of writing the Kogan share price is up 13% to $4.50, bringing its week to date return to a massive 40%.
Why is the Kogan share price on fire?
The catalyst for this gain was a trading update released on Thursday morning which revealed that Kogan’s core ecommerce business returned to form in the final quarter of last year.
According to the release, Kogan experienced record trading in the peak Christmas period with its Black Friday and Boxing Day sales producing record days in the history of the business.
As a result of this strong Christmas trading, the company expects to report a 9.7% increase in first half revenue compared to the prior corresponding period. This is quite a turnaround following a disastrous start to FY 2019.
One broker that appears to have been pleased with what it saw was UBS.
According to a note out of the investment bank, it has retained its buy rating and $5.50 price target. This price target implies further upside of over 22% even after its stellar share price gain this week.
UBS appears to believe that Kogan’s shares are trading at an attractive level given its current growth profile.
I wouldn’t argue with UBS if Kogan delivers on the broker’s forecasts. Its analysts now expect Kogan to post earnings per share of 16 cents in FY 2019 and then 24 cents in FY 2020.
If it delivers on UBS’ expectations it means that its shares are currently trading at 28x FY 2019 earnings and under 19x FY 2020 earnings.
While I would still prefer to wait until its results are released next month, it is admittedly a very tempting investment option along with Accent Group Ltd (ASX: AX1) and Super Retail Group Ltd (ASX: SUL).
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Super Retail Group Limited. The Motley Fool Australia has recommended Accent Group and Kogan.com ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019