Currys (LSE:CURY) has seen its shares drop into the penny stock category in recent months. Could now be a good time to buy the dip and add the shares to my holdings? Let’s take a closer look.
Household name
Currys is a leading retailer of technology products and services including household electrical and white goods as well as home entertainment and more. It operates through its online store but you can also find nearly 830 stores across seven countries. I must admit I have purchased many home electrical items from a Currys store.
So what’s the current state of play with the Currys share price? As a quick reminder, a penny stock is one that trades for less than £1. Currys shares are currently trading for 87p. At this time last year, the shares were trading for 136p, which is a 36% drop over a 12-month period.
Currys sector has seen many online-only disruptors appear, eating away at the market share of larger household names like Currys. This, and the recent stock market correction caused by macroeconomic headwinds and geopolitical tensions have driven down the share price, in my opinion. A recent warning on profits due to a challenging market won’t have helped the penny stock either.
For and against buying the shares
FOR: Currys performance is a positive in my eyes. I do understand that past performance is not a guarantee of the future, however. Looking back, it has recorded consistent revenues of over £10bn for the past four years. I believe its brand power, profile, and presence has allowed it to command a healthy share of the market and kept performance consistent.
AGAINST: Recent macroeconomic headwinds are a concern. Soaring inflation, rising costs of materials, and the supply chain crisis mean retailers like Currys could see profits squeezed and a lack of stock to sell. This could affect performance as well as investor sentiment and returns.
FOR: Currys shares would boost my passive income stream through dividends. The shares currently yield close to 4%. There aren’t many stocks in the penny stock category that command such an enticing yield. In addition to this, the shares look good value for money on a price-to-earnings ratio of 13 currently.
AGAINST: As mentioned earlier, competition in the marketplace is rife. Gone are the days where everyone would go to their local high street, pop into Currys, and buy a TV or laptop. The e-commerce boom and rise in online-only operators has had an impact on Currys performance. Currys has to worry about footfall and rent for its numerous locations. If spending habits and the momentum of online-only disruptors continues, Currys performance and returns could be affected.
A penny stock I’d buy now
The market correction has thrown up some excellent bargains in recent months. My investing mantra has always been that of buying to hold for the long term. Currys shares fit that mantra down to a tee. Although they look beaten down currently, I believe the shares will rise in time, out of penny stock territory.
Currys has the brand power and profile and diverse business model to continue to succeed in my opinion. This will underpin performance which should also see returns increase, especially those juicy dividend payments I seek to boost my passive income stream. I’m planning on buying the dip!