Dixons Carphone (LSE: DC) shares have been rising. The stock is up more than 10% in one month and 55% over the last 12 months. The stock is cheap and trades on a price-to-earnings ratio of 13 times.
I reckon now is a buying opportunity and I’d snap up Dixons Carphone shares in my portfolio. Here’s why.
Online boom
Dixons Carphone is a multi-channel electrical retailer. It’s the stellar growth in online sales that has really helped the business. Especially at a time when its stores are temporarily closed due to Covid-19
The lockdowns have meant that most consumers have been stuck at home. Sellers, such as Dixons Carphone, of entertainment equipment such as game consoles, laptops, and TVs, have fared well.
I expect the e-commerce business to continue to grow. I think the pandemic provides evidence that consumers are getting comfortable with spending large amounts of money on electrical goods from a reputable retailer.
Once the stores reopen, the long-term strategy is to provide customers with fantastic face-to-face service and offer different products under one roof. The key here is provide value to customers, which should give Dixons Carphone the competitive edge over its online rivals.
Strong brand
Dixons Carphone is a well-known high-street name. That’s why I, like many, continue to shop there. The company’s branding power gives allows it to stand out from the competition.
What I think is encouraging is how well Dixons Carphone has ramped up selling online. Concepts such as ShopLive have kept the face-to-face element of shopping. This is where customers can get video help from experts at home. Again, this personal touch gives Dixons Carphone the competitive edge and should help the business going forward.
Growth opportunity
I reckon the coronavirus crisis has given Dixons Carphone a structural growth opportunity. And the company’s strong brand will help here too.
I think remote working is here to stay. Even if employers don’t adopt 100% home working, I reckon a hybrid of remote and office work could be a viable option for employees. This works well for sellers of home office and tech equipment. Dixons Carphone is in a good position to monetise on this trend. Hence I’d be a long-term buyer of the shares at these levels.
Competition
What concerns me is that online competitors such as Amazon pose a threat to Dixons Carphone. And this isn’t going to go away. Dixons Carphone is pulling out all the stops to distinguish itself from the competition.
So far it’s working but I question whether this will continue after Covid-19. I guess it depends whether customers want to pay a little more to get face-to-face help from an assistant and travel to a store when they open.
If the economic outlook weakens and unemployment rises, consumers are less likely to spend money on discretionary items. They are less likely to upgrade their electrical goods. This could place pressure on revenue and profitability, and thereby Dixons Carphone shares.
I can’t dismiss the progress the company has made during the pandemic. I think the stock is cheap and there are some long-term growth opportunities it could capitalise on. For now, I’d be a buyer of the shares.
