Street Calls of the Week
Investing.com - TD Cowen has reiterated its Buy rating and $470.00 price target on Home Depot (NYSE:HD), currently valued at $351 billion in market cap, following reports that the home improvement retailer submitted a competing offer to acquire specialty distributor GMS. According to InvestingPro data, Home Depot maintains a GOOD financial health score with $162.95 billion in trailing twelve-month revenue.
The potential bid, first reported in an unsubstantiated Wall Street Journal article, would put Home Depot in competition with QXO, which has already offered $95.20 per share for GMS, representing an enterprise value of approximately $5 billion at roughly 9.7 times trailing twelve-month EBITDA. As a prominent player in the Specialty Retail industry, Home Depot has demonstrated strong financial discipline, maintaining dividend increases for 15 consecutive years.
TD Cowen expressed a neutral stance on the potential acquisition, noting that while Home Depot has a strong track record with mergers and acquisitions, the deal would expand the company further from its core business and would likely be margin dilutive at a price point that "isn’t inexpensive."
The potential GMS acquisition would continue Home Depot’s strategy of building a broader professional contractor ecosystem, following previous acquisitions including HD Supply, International Design Group, and SRS, the research firm noted.
TD Cowen acknowledged that while the market initially viewed the SRS acquisition with skepticism, that deal "has thus far proven to be very successful," though a GMS acquisition would take Home Depot further outside its core single-family residential professional business, add operational complexity, and likely delay share buybacks. Get deeper insights into Home Depot’s acquisition strategy and comprehensive financial analysis with InvestingPro’s detailed research reports, available for 1,400+ top stocks.
In other recent news, Home Depot has made significant moves in the industry, including a $5 billion bid to acquire GMS, a specialty building products distributor. This acquisition is part of Home Depot’s strategy to expand its presence in the professional contractor market, following its previous $18 billion acquisition of SRS Distribution. Truist Securities maintained its buy rating on Home Depot, citing the company’s strategic positioning to benefit from anticipated growth in the housing demand segment. Meanwhile, TD Cowen reiterated its buy rating and a $470 price target for Home Depot, highlighting the company’s successful tariff mitigation strategies and strong market share growth in both the professional contractor and do-it-yourself segments.
In corporate developments, Home Depot appointed Angie Brown as the new Executive Vice President and Chief Information Officer. Brown, who has been with the company for 27 years, is expected to enhance the company’s technology strategy, focusing on infrastructure, cybersecurity, and software development. Additionally, Home Depot announced a quarterly cash dividend of $2.30 per share, marking its 153rd consecutive quarter of dividend payouts, which underscores its commitment to returning value to shareholders.
Guggenheim also maintained its buy rating for Home Depot with a $450 price target, noting the company’s strong first-quarter performance and strategic initiatives aimed at enhancing the PRO ecosystem and expanding its product offerings. The company has seen a significant increase in comparable store sales, driven by improvements in order management and merchandising advancements. These developments collectively reflect Home Depot’s ongoing efforts to strengthen its competitive positioning within the home improvement industry.
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