Why the Harvey Norman Share Price Soared Today

What Happened to Harvey Norman Holdings Ltd’s Share Price?

Shares in retail giant Harvey Norman Holdings Ltd [ASX:HVN] rose sharply in today’s strong Aussie stock market session. The 5% daily gain pushed the Harvey Norman share price to its highest level in more than seven years.

Why Did This Happen to HVN Shares?

Yesterday’s federal budget brought Harvey Normal a wonderful ‘free kick’. Products worth up to $20,000 that are used to run a business will now be available for an immediate tax deduction. This is available to businesses with an ABN that are earning less than $2 million in revenue.

The kind of products this change covers includes fridges, coffee machines, tables and chairs, printers, hot water units and computers. This stuff is Harvey Norman’s ‘bread and butter’ — and the kinder tax treatment looks set to get tills ringing across the retail landscape. The prospect of an entrepreneurial spending spree fired HVN investors’ imaginations today.

What Now for Harvey Norman Holdings Ltd?

Harvey Norman is dominating the homemaker market. As long as Australian interest rates stay low and housing construction continues apace, this part of the business should continue to thrive.

But it’s important to stay disciplined on valuation when considering an investment in a stock like this. With the shares at fresh seven-year highs, it’s hard to argue that this large-cap stock looks cheap.

We should commend chairman Gerry Harvey on his stewardship of this company through a tough time…but I think you can buy better value retail stocks on the Aussie market today than Harvey Norman.

Cheers, Tim Dohrmann
Editor, Money Morning

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