Telsey maintains RH stock Outperform with $280 target

On Monday, Telsey Advisory Group reiterated an Outperform rating on Restoration Hardware (NYSE:RH) shares, maintaining a $280.00 price target. The firm’s analyst, Cristina Fernandez, expressed confidence in the company’s first-quarter performance and its 2025 free cash flow target, despite the stock’s significant decline to $145.66. According to InvestingPro data, RH shares have fallen 55.48% over the past six months, with the RSI indicating oversold conditions. The stock currently trades at a P/E ratio of 40.24, suggesting a premium valuation despite recent declines.

The company’s recent earnings call revealed that demand trends are aligning with the first-quarter revenue growth guidance of 12.5%-13.5%, and the expectation of positive free cash flow in 2025. However, specific details were not provided, leaving room for interpretation. The issue of tariffs remains a point of uncertainty, particularly with the company’s exposure to Vietnam, and it is unclear how this will impact investor sentiment. InvestingPro subscribers have access to 14 additional key insights about RH, including detailed analysis of its financial health and growth prospects.

Despite the challenges, including a fourth-quarter performance and 2025 guidance that fell short of expectations, as well as concerns over the company’s balance sheet, there are several factors that Telsey believes support the Outperform rating. Restoration Hardware’s demand growth at 17% quarter-to-date surpasses that of its peers, attributed to new products and increased catalog circulation. Additionally, the company’s high-end market positioning and affluent customer base may provide it with more flexibility to manage tariffs.

Restoration Hardware’s financial position is also expected to strengthen as it reduces its inventory levels, which are currently estimated to be $200 million to $300 million above what is necessary. Telsey’s price target of $280 is based on a price-to-earnings (P/E) multiple of 25 times the firm’s 2025 earnings per share estimate of $11.20. It is important to note that Telsey’s estimates do not account for any potential impact from reciprocal tariffs.

In other recent news, Restoration Hardware’s fourth-quarter earnings for fiscal year 2024 have prompted several analysts to adjust their price targets for the company’s stock. Stifel maintained a Buy rating but lowered their price target to $390, citing a slightly weaker revenue forecast offset by stronger profitability expectations. Meanwhile, Loop Capital significantly reduced their price target to $190, maintaining a Hold rating due to earnings that did not meet expectations and concerns over new tariffs affecting the company’s profitability. UBS also lowered their target to $235, maintaining a Neutral rating, as they anticipate downward trends in financial estimates due to the company’s guidance and tariff impacts.

TD Cowen reduced their price target from $510 to $220 while maintaining a Buy rating, highlighting concerns about free cash flow, liquidity, and a cautious revenue forecast for fiscal year 2025. Despite these challenges, Restoration Hardware’s sales grew by 18% on an underlying basis in the fourth quarter, outpacing its peers, according to UBS. Analysts have pointed out the impact of tariffs, particularly on goods from China, Vietnam, Indonesia, and India, which could affect the company’s cost structure and consumer confidence. Restoration Hardware’s elevated inventory levels were noted by UBS as a factor contributing to lower cash reserves, but they are expected to mitigate the need for costly merchandise purchases in the near term. These developments reflect a mixed outlook for Restoration Hardware, with analysts expressing varying degrees of concern and optimism about the company’s future performance.

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