Guggenheim cuts RH stock target to $500, maintains Buy rating

On Wednesday, Guggenheim maintained a Buy rating on Restoration Hardware (NYSE: RH (NYSE:RH)) but reduced its price target from $550 to $500. The adjustment follows a detailed evaluation of the company’s product launches and financial outlook. According to InvestingPro data, RH currently trades at a P/E ratio of 66.56, suggesting a premium valuation. Analyst targets across Wall Street range from $250 to $550, with the next earnings report scheduled for March 26, 2025.

Steven Forbes, an analyst at Guggenheim, provided insights into Restoration Hardware’s ambitious product innovation plans for 2025. These plans included the introduction of numerous new collections, such as eight outdoor furniture lines and between 85 to 90 new interior collections, encompassing a variety of products from furniture to textiles. The company’s recently launched RH Interiors Spring Sourcebook and RH Outdoor 2025 Sourcebook revealed approximately 35 new furniture collections.

Furthermore, the analyst highlighted the launch of 50 to 55 new collections within the RH Modern Fall 2024 Sourcebook, which features 30 to 35 new furniture collections. Additional launches are anticipated in the first half of 2025, such as RH Couture Upholstery by Dmitriy & Co., and the first Waterworks Sourcebook is expected to be unveiled in the second half of the year. There is also the potential unveiling of a new brand extension in Fall 2025.

Forbes underscored the anticipated positive outcomes of these launches, including a broad-based re-scaling across the company’s assortment tiers. Guggenheim’s analysis projects a path to positive free cash flow generation for Restoration Hardware in 2025, estimating it to be in the range of $125-150 million before any operational working capital benefits that might arise from improved inventory turnover. This projection is particularly significant given that InvestingPro data shows RH’s current free cash flow yield at -8%, highlighting the importance of this anticipated turnaround. Get access to RH’s comprehensive Pro Research Report, along with detailed analysis of 1,400+ other US stocks, exclusively on InvestingPro.

In light of these developments, despite the lowered price target, Guggenheim reaffirmed its Buy rating on Restoration Hardware shares and reiterated its "Best Idea" designation, expressing continued confidence in the company’s growth trajectory and financial prospects.

In other recent news, Restoration Hardware has been the focus of several analyst reports ahead of its upcoming fourth-quarter earnings announcement. TD Cowen analyst Max Rakhlenko increased the price target for Restoration Hardware to $510, citing a positive financial outlook and strong revenue growth projections. The firm adjusted its FY25 revenue forecast to $3.84 billion, marking a significant year-over-year increase. In contrast, Telsey Advisory Group reduced its price target for Restoration Hardware from $500 to $420 while maintaining an Outperform rating, highlighting double-digit growth in demand and strategic plans for expansion in 2025.

Citi also lowered its price target to $437, retaining a Buy rating, and anticipates a slight miss on earnings per share due to competitive pricing. Stifel, however, reiterated a $500 price target, emphasizing the company’s growth potential and strategic corporate actions to manage long-term debt. Analysts from TD Cowen, Telsey, Citi, and Stifel are keenly observing Restoration Hardware’s performance, especially given its strategic moves, including exiting markets with significant tariff risks.

Meanwhile, TD Cowen also highlighted Planet Fitness (NYSE:PLNT), RH, and O’Reilly (NASDAQ:ORLY) Automotive as top picks in the Hardlines retail sector amid economic uncertainty. Analysts see O’Reilly Automotive as well-positioned to handle tariff-related price increases, with expectations of market share growth. Restoration Hardware’s upcoming earnings report is anticipated to provide further insights into its financial performance and the broader retail sector’s health.

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