JFrog stock rises as Cantor Fitzgerald maintains Overweight rating after strong Q2
Investing.com - Home Depot (NYSE:HD), a prominent player in the Specialty Retail industry with a market capitalization of $372 billion, received a reiterated Buy rating from Truist Securities, which maintained its $417.00 price target following the retailer’s agreement to acquire GMS for $110 per share, representing an enterprise value of approximately $5.5 billion.
The acquisition comes after GMS reportedly received a bid of approximately $95 per share from QXO, potentially accelerating Home Depot’s timeline for the purchase. The deal represents about 11 times GMS’s cyclically-depressed adjusted EBITDA and could prove highly accretive through both synergies and cyclical recovery, according to Truist. With Home Depot’s robust EBITDA of $25.5 billion and strong financial health score according to InvestingPro, the company appears well-positioned to integrate this acquisition.
GMS specializes in indoor construction materials for both residential and commercial building projects, complementing Home Depot’s initiatives in the Complex Pro space. Similar to Home Depot’s previous acquisition of SRS, which focused on roofing, the GMS purchase is expected to provide the company with additional leverage with general contractors.
Truist believes the acquisition gives Home Depot "another set of tentacles to gain wallet share with contractors" as part of its material commitment to the complex pro business. The firm noted that the deal is "easily digestible" for Home Depot financially.
The research firm maintains its positive outlook on Home Depot, stating that housing demand in the U.S. is "bound to accelerate over time" and that Home Depot will be "increasingly armed to tackle a growing share of this expected spend."
In other recent news, Home Depot announced its acquisition of GMS for $5.5 billion, a move that Fitch Ratings has assessed, maintaining Home Depot’s Long-Term Issuer Default Rating at ’A’ with a Stable Outlook. The acquisition, funded through cash and debt, is expected to slightly increase Home Depot’s leverage, but the company plans to focus on debt reduction to meet its leverage targets. Fitch also projects Home Depot’s revenue to reach around $164 billion in 2025, assuming the GMS acquisition closes in the third quarter of 2025. Analysts from DA Davidson, UBS, and Mizuho (NYSE:MFG) have reiterated Buy and Outperform ratings for Home Depot, citing benefits from the acquisition, such as increased scale and potential for faster growth in the home improvement market. DA Davidson maintained a $450.00 price target, while UBS and Mizuho set targets at $475.00 and $435.00, respectively. Barclays (LON:BARC) has also raised its price target to $110.00, maintaining an Equalweight rating. The acquisition aligns with Home Depot’s strategy to expand offerings for complex projects, with GMS adding drywall and ceiling products to its distribution platform. Despite inflationary tariffs and the dilutive impact of acquisitions, Fitch expects Home Depot’s EBITDA to decline slightly in 2025 but sees long-term growth potential.
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