Stock pick: the Home Shopping Network (HSNI) is still going strong

Increased focus on mobile shoppers could boost sales

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Chart showing trailing 12-month performance of HSN Inc.

To many people, the Home Shopping Network likely seems like an antiquated way to buy a new gadget or some new piece of clothing. After all, you can buy pretty much everything online these days.

Yet, it’s still kicking. The channel is beamed into 95 million U.S. homes and it claims it has 4.9 million active shoppers.

Part of what’s keeping the business going is that it’s more than just a channel. It has catalogues, stores and its Cornerstone division sells a several home and apparel brands. HSN Inc. (NASDAQ: HSNI) is also a publicly traded company that a number of analysts think will do well over the next year.

The company did hit a bit of a rough patch this year—it saw no growth in the first quarter and its stock price is down 5.7% year-to-date—but Victor Anthony, an analyst with Topeka Capital Markets, says things are turning around. On June 23, he upgraded the stock from a hold to a buy.

In the first quarter the company saw year-over-years shopping growth decline by 1%, the first negative growth numbers since the recession.

On its earnings call, management said that demand did increase by the end of the quarter and that it was still strong into April.

Anthony points out that April and May were good month for all retailers and HSN shouldn’t be any different. “We expect to see a return to growth in the second half of 2014,” he says.

The company is also upgrading its technology—it has a growing mobile user base—which Anthony says will allow it to better interact with its customers.

“(These) enhancements will allow HSN to touch every customer with a customized communication message; touch customers multiple times based on the customer’s lifetime value to incentivize purchase behavior; and allow customers to use offers across platforms,” Anthony wrote in his upgrade report.

These tech investments will help attract new customers, increase spend per customer and help retain current shoppers, he says.

Anthony points that the company has little leverage, which will allow it to either buyback a significant number of shares or issue a special one-time dividend. It could also increase its dividend — it currently has a 1.7% yield. He thinks that management will execute on one of these two options in September at the earliest.

The stock is currently trading at $58 a share, but Anthony thinks it could hit $67 over the next 12 months. The median price target is $75, while the highest is $83, according to S&P Capital IQ.

Yes, you may buy more stuff online these days, but don’t count out the Home Shopping Network just yet.

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