The market may be dropping lower today but that hasn’t stopped the Kogan.com Ltd (ASX: KGN) share price from charging higher.
In afternoon trade, the ecommerce company’s shares are up 1.5% to $16.89.
Why is the Kogan share price pushing higher?
The Kogan share price appears to be charging higher today on the belief that the COVID-19 lockdown in Victoria will give its sales a boost.
This afternoon the Victorian government announced that it would be locking down the state for five days from midnight tonight. This action is being taken in an effort to stop the spread of a highly transmissible strain of COVID-19.
During previous lockdowns, online retailers such as Kogan and Temple & Webster Group Ltd (ASX: TPW) performed very strongly as investors were forced to do their shopping online.
Should you buy Kogan shares?
A five-day lockdown isn’t going to make a huge difference to Kogan’s full year sales, so investors may not want to make an investment decision purely on that.
Though, one broker that was already recommending investors to buy Kogan shares was Credit Suisse. Earlier this month the broker retained its outperform rating and increased its price target on its shares to $21.08.
Based on the current Kogan share price, this price target implies potential upside of almost 25% over the next 12 months.
According to the note, the broker was pleased with its half year update and appears confident there will be more strong growth ahead for the company.
This is because it believes Kogan is well-placed to benefit from the shift to online shopping. This is particularly the case given the expansion of its product range and the recent $122 million acquisition of New Zealand-based online retailer Mighty Ape.
Mighty Ape operates online stores in New Zealand and Australia and has a focus on gaming, toys, and other entertainment categories. It currently has 719,000 active customers, bringing the company’s total to over 3.7 million.
Following today’s gain, the Kogan share price is now up 231% in 12 months.
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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd and Temple & Webster Group Ltd. The Motley Fool Australia has recommended Kogan.com ltd and Temple & Webster Group Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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