Stifel cuts Restoration Hardware price target to $390

On Monday, Stifel analysts adjusted their outlook on Restoration Hardware (NYSE: RH (NYSE:RH)) shares, reducing the price target to $390 from the previous $450, while still maintaining a Buy rating on the stock. Currently trading at a P/E ratio of 40.24x and with a market capitalization of $2.73 billion, RH faces significant challenges. This adjustment comes in the wake of the company’s fourth-quarter earnings for the fiscal year 2024, which were released last Friday evening.

The Stifel analyst cited a "modestly reduced" fundamental outlook for Restoration Hardware, taking into account a slightly weaker revenue forecast balanced against stronger profitability expectations. The new price target of $390 is based on a scenario analysis that does not factor in the potential impact of Liberation Day tariffs, which could pose a $362 million EBITDA challenge for fiscal year 2024 if no further mitigation efforts are made.

Restoration Hardware’s stock experienced a significant 42% drop post-earnings, a contrast to the S&P 500’s 10.5% decline in the same period. According to Stifel, this sharp decline may have already accounted for the worst-case scenario in the stock’s valuation.

The initial tariff announcement is seen by the analysts as a "Maximalist opening salvo," with the expectation that while some tariffs will remain, others may lead to retaliations, and ultimately, concessions from countries that are highly dependent on trade. Vietnam, in particular, is noted as having a strong incentive to avoid tariffs and is significant for Restoration Hardware and Floor & Decor (NYSE: FND).

Stifel’s revised price target reflects a greater emphasis on the fundamental case for Restoration Hardware, anticipating that the market will refocus on the company’s fundamentals as more evidence emerges to support the Maximalist view. With a beta of 2.44 and an Altman Z-Score of 1.29, InvestingPro analysis indicates higher volatility and potential financial stress concerns. The analysts express confidence in Restoration Hardware’s "advantaged positioning" in the market, though careful monitoring of these metrics will be crucial for investors.

In other recent news, Restoration Hardware has been the focus of several analyst adjustments following its fiscal fourth-quarter results, which did not meet expectations. Loop Capital Markets significantly cut its price target from $450 to $190 while maintaining a Hold rating, citing concerns about future profitability and new tariffs affecting the company’s sourcing countries. UBS also revised its price target downward to $235, maintaining a Neutral rating, and highlighted liquidity concerns due to lower cash reserves and potential tariff impacts. TD Cowen reduced its target to $220, maintaining a Buy rating, but expressed worries over decelerating revenue growth and elevated inventory levels. Meanwhile, Stifel maintained its Buy rating and a $450 price target, focusing on a positive profitability outlook for fiscal year 2025 despite acknowledging mixed results and tariff risks. Citi downgraded Restoration Hardware from Buy to Neutral, slashing its price target to $200, pointing to external pressures such as tariffs and slowing consumer spending as key challenges. These recent developments reflect a cautious stance from analysts amid a complex external environment impacting Restoration Hardware’s growth trajectory.

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