The Adairs Ltd (ASX: ADH) share price has been through a lot of volatility in 2022.
It has mostly been negative for Adairs shares. In fact, the Adairs share price has fallen around 45% this year.
FY22 has been challenging for the business. The first half was affected by COVID-19 impacts, including store closures, which wiped millions off the expected earnings before interest and tax (EBIT).
But after the difficult decline, is the Adairs share price an opportunity?
Broker ratings on the Adairs share price
Let's look at what brokers think of the business. A price target is where an analyst thinks that the share price will be in 12 months from the time of the rating.
The Adairs share price is rated as a buy by the broker Morgans with a price target of $3.50. That implies a possible rise of more than 50%.
UBS rates Adairs as a buy, with a price target of $5.20. That suggests a potential rise of around 130%.
While Ord Minnett only rates Adairs as a hold, the price target is $3.30. That implies a possible rise of almost 50%.
What are the positives on Adairs?
One of the main things that brokers have noted is the company's acquisition of Focus on Furniture. This gave the business more exposure to the large furniture category.
Management is hoping to grow the Focus on Furniture store network across the country. Adairs is also planning to expand the range offered by the business. Another initiative is to grow the online sales of Focus, as well as the rest of the group. Adairs thinks that Focus on Furniture can reach sales of at least $250 million within five years.
Another thing that can help Adairs' returns is the dividend. Based on the estimates, Morgans currently thinks that Adairs could pay a grossed-up dividend yield of 12% in FY22 and over 16% in FY23.
The company is also focused on upsizing some Adairs stores, growing its membership numbers and adding a physical presence for Mocka. Morgans likes the Mocka expansion potential.
In the second half of FY22, Adairs is expecting to open one or two new stores and upsize four to six existing stores.
Recent trading performance can be important for the Adairs share price. The business said that in the first seven weeks of FY22, its group like-for-like sales were essentially flat, down only 0.3%. However, including Focus on Furniture, total sales were up 33.8%. Mocka sales were up 14.8% and Adairs online sales were up 9.7% over the first seven weeks of the second half period of FY22.
The Adairs share price opens trade on Monday at $2.22.
