H&R Block adds to bargain-hunter rally inspired by bets on reopening, Biden

In this news, we discuss the H&R Block adds to bargain-hunter rally inspired by bets on reopening, Biden.

(Reuters) – H&R Block Inc HRB.N gained slightly on Friday after rallying in 13 of the past 14 sessions as bargain-hunting investors bet a Joe Biden presidency will help the tax preparer of income bruised by the virus with a vaccine against the coronavirus.

The stock, while significantly underperforming the market since the start of the year, has recently outperformed significantly.

On Friday it was up 0.1% to $ 17.76 after rising 27.6% from September 18 to Thursday’s close. The S&P 400 .IDX rose 0.5% on Friday after gaining 6.8% between September 18 and Thursday.

H&R Block has fallen around 24% year-to-date, compared to a decline of around 3% in the index.

BTIG analyst Mark Palmer said the rally depended on investors’ expectations going forward “politically and in terms of a pandemic”.

While Trump in 2016 promised a tax code so simple it would bankrupt H&R Block, investors see Biden’s tax changes bringing consumers back to H&R Block. His shares closed 20% lower on Thursday than the day Trump won the 2016 election.

“Obviously, it didn’t have the kind of impact that (Trump) attributed,” Palmer said. “The flip side is if we see significant tax changes under democratic administration, there may be an increased need for consumers to seek help.”

Investors are also betting that a coronavirus vaccine will allow more in-person tax dates.

“HRB’s ability to operate has been severely weakened by the pandemic… especially for their in-store assisted tax preparation,” said Palmer who is evaluating the neutral stock.

Barrington Research analyst Alexander Paris says low price-to-earnings ratio is key to recent rally, with stocks trading around 5 times his estimate of 2020 earnings per share and 4 times his estimate of 2021 compared to a five-year average of 13.5.

Paris also expects a much better 2021 than 2020 when the tax day moved from April to July due to the coronavirus lockdown.

Reporting by Sinéad Carew; Edited by David Gregorio

Original © Thomson Reuters

Originally posted 2020-10-11 11:06:10.

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