Over the past month, equity markets around the world have experienced a wobble. Although this has been most pronounced across the pond in the US, the FTSE 100 and FTSE 250 are also down. For example, the FTSE 250 has fallen just over 7% in the past month. This has made some new penny stocks in the process. One that has caught my eye is Currys (LSE:CURY). The share price has fallen below 100p for the first time since 2020. Here’s why I’m keen.
Woes causing a share price tumble
Currys is a well-known household electrical appliance retailer in the UK. It also has operations abroad, meaning that globally it has over 35,000 employees.
Although the sector it operates in is very competitive, the company also has to deal with changing demands in the electrical and tech appliance space. This is one of the reasons that the firm has become a penny stock recently. Investors are concerned about rising inflation meaning that interest rates are going to have to be raised quickly. This should stunt demand, causing people to save more than spend. If I’m a consumer who’s concerned about the rising cost of living, would I want to buy a new TV or laptop right now? Probably not.
Another reason why the share price has fallen over the past month is due to some uncertainty over the holiday trading results. In the 10-week trading period to 10 January, year-on-year revenue fell 5%. The overall UK tech segment of the business was down 10% versus last year. Given that last year the country was in lockdown, I would have expected revenue to be much higher this year.
Combining the above meant that the Curry share price trades at 99p, having fallen 17% over the past month. Over the past year, the share price is down 16%.
A short-term penny stock?
The reason why I’m keen on Currys is because I think this is just a short-term blip. Although it’s a penny stock according to definition, I see the company as an established player in the market. I think one of the advantages that it has is its strong sales channels. Online sales for the UK and Ireland were up 29% versus the same period two years ago. The company isn’t just reliant on physical stores for growth, but can tap into the website for revenue.
I also think that tech products will see higher demand in the future. For example, as the metaverse grows, more and more people will have a need to own a VR headset to get access to the virtual world. Currys can be a leader in sales here. Although I wouldn’t buy shares in the penny stock as a pure metaverse play, it’s definitely an added benefit of owning shares in the company.
In terms of risks, supply chain disruption and tough competition are both valid causes for concern. Ultimately, there isn’t enough risk there to overly concern me, so I’m considering buying shares at the moment.
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Jon Smith and The Motley Fool UK have no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
