Home Depot stock rises as DA Davidson reiterates Buy rating after GMS acquisition

Investing.com - DA Davidson has reiterated a Buy rating and $450.00 price target on Home Depot (NYSE:HD), currently trading at $365.22, following the company’s definitive agreement to acquire GMS. As InvestingPro data shows, Home Depot maintains a strong market position as a prominent player in the Specialty Retail industry, with a substantial market capitalization of $362 billion.

Home Depot officially announced on Tuesday it would purchase GMS for $110 per share, representing an enterprise value of $5.5 billion. The announcement confirms unconfirmed reports from June 20th that Home Depot was looking to top QXO’s bid for GMS. The acquisition aligns with Home Depot’s strong financial health, rated as GOOD by InvestingPro analysts.

The acquisition price came in approximately $500 million less than what DA Davidson had previously suggested was possible. The research firm had earlier projected a potential offer of $121.50 per share, which would have equated to a $6 billion enterprise value and represented a 20% premium to QXO’s bid.

Home Depot secured the deal at $110 per share, successfully outbidding QXO while paying less than what analysts had anticipated might be necessary to complete the transaction.

DA Davidson analyst Michael Baker maintained his positive outlook on Home Depot stock following the announcement, keeping both his Buy recommendation and $450.00 price target unchanged. This target aligns with the broader analyst consensus, as InvestingPro data reveals analyst targets ranging from $308 to $484. Subscribers can access 7 additional exclusive InvestingPro Tips and a comprehensive Pro Research Report for deeper insights into Home Depot’s valuation and growth prospects.

In other recent news, Home Depot has made a significant move by agreeing to acquire GMS Inc (NYSE:GMS). through its subsidiary SRS Distribution. This acquisition is valued at approximately $4.3 billion in cash, with the transaction expected to enhance Home Depot’s distribution network significantly. Analysts have varied opinions on this development. UBS has reiterated a Buy rating with a $475 price target, highlighting the benefits of the acquisition, while Mizuho (NYSE:MFG) maintains an Outperform rating with a $435 price target, viewing the acquisition as strategically timed. Barclays (LON:BARC) has adjusted its price target to $110, maintaining an Equalweight rating, and anticipates minimal opposition to the acquisition. TD Cowen also maintains a Buy rating, though it notes potential complexities with the acquisition. Home Depot plans to fund the transaction through cash and debt, and it is expected to be accretive to adjusted earnings per share in the first year post-closing. The acquisition aligns with Home Depot’s strategy to enhance its offerings for professional contractors.

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