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On Monday, Stifel analysts maintained a Buy rating on Restoration Hardware (NYSE:RH) shares while reducing the price target to $450 from the previous $500. The adjustment comes as the firm anticipates the company’s fourth-quarter earnings for fiscal year 2024, which are scheduled to be announced after the market closes on April 2, 2025. According to InvestingPro data, RH’s stock has shown significant volatility, with the price currently at $236.28, representing a 40% decline year-to-date and trading well below the analyst consensus target range of $240-$530.
The analysts expressed a cautious stance due to the current broad market volatility and weakness. Despite this, their outlook remains optimistic, believing that the market’s recent fluctuations will lead to disruption rather than a significant decline from the second half of 2024’s demand surge. This view is supported by the health of other key premium indicators and the positive results and commentary from MLKN’s third-quarter fiscal year 2025, which they feel is not fully appreciated amid the uncertainties. InvestingPro analysis reveals that RH maintains strong liquidity with a current ratio of 1.43, though it operates with a significant debt burden. Get access to 10+ additional exclusive ProTips and comprehensive financial metrics with InvestingPro.
Stifel’s revised estimates include a 14% compound annual growth rate (CAGR) in revenue from FY24E to FY27E, which now accounts for a more significant demand deceleration but still exceeds consensus expectations. Their confidence in Restoration Hardware’s profit and cash flow projections remains strong as the company moves past a period of heavy expenditure, which likely included essential investments to exit the Chinese market, protecting the company from additional tariffs.
Restoration Hardware’s stock has experienced a 48% decline from its late January peak after the third-quarter fiscal year 2024 report, a steeper drop compared to the S&P 500’s 8% decrease during the same period. Stifel analysts believe that the current market pricing excessively reflects the uncertainty and significantly undervalues Restoration Hardware’s advantageous long-term growth prospects, with the company’s shares trading at 7.5 times the enterprise value to FY26E EBITDA ratio.
In other recent news, Restoration Hardware is set to announce its fourth-quarter earnings, with analysts projecting sales of $832 million, EBIT of $108 million, and EPS of $2.06. These figures slightly exceed consensus estimates and suggest a 12.7% year-over-year sales growth. Analysts from BofA, Guggenheim, Telsey, and Citi have adjusted their price targets for the company, with targets now ranging from $410 to $500, while maintaining either a Buy or Outperform rating. Guggenheim highlighted the company’s extensive product innovation plans, including the launch of numerous new collections, which could positively impact its free cash flow in 2025. Telsey noted Restoration Hardware’s significant growth in demand, driven by new product introductions and expanded Source Book circulation. Citi analysts anticipate a sales outperformance in the upcoming earnings report but caution about a competitive pricing environment affecting EPS. Despite macroeconomic concerns, TD Cowen identified Restoration Hardware as a top pick in the Hardlines retail sector, citing solid data despite market pressures. Investors are keenly awaiting the earnings release, which will provide further insights into the company’s financial health and strategic direction.
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