Janney Capital Markets Raises HHGregg (HGG) Fair Value Estimate To $27

Janney Capital Markets analysts David Strasser and Sarang Vora maintained their Buy rating for shares of HHGregg, Inc. (NYSE: HGG) and raised the fair value estimate from $23 to $27.

The analysts believed that the specialty retailer of consumer electronics would benefit from the growth of the Home 3D electronics market.

They also said that HHGregg, Inc. was set to increase overall floor space by 30% over the next few years, while rental rates would remain at relatively low levels.

The Janney Capital Markets analysts wrote, "we are raising our FY11 EPS estimate to $1.35 (previously, $1.30) and our fair value estimate to $27 (previously, $23). Our fair value estimate implies a 20x P/E multiple on our FY11 EPS estimate. This higher multiple also represents the visibility of about 30% square footage growth in the next 2 to 3 years. The higher square footage growth is coming at a time when the product cycle is improving. Even more positive is the feedback from the real estate industry, telling us that rents remain well below previous rent levels. In many cases 20% to 40% below the previous tenant on many Northeastern and Mid Atlantic locations. On page 2, figure 1 – we provide a base case estimate of incremental benefits from 3D TVs. We see strong comp and EPS benefit to HGG from the 3D product cycle, making our higher estimates look conservative."