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On Thursday, Telsey Advisory Group maintained a positive outlook on Home Depot stock (NYSE:HD), reiterating an Outperform rating and a price target of $455.00. The firm’s analyst cited a mix of factors influencing the home improvement retailer’s future performance, including industry trends and housing market dynamics. According to InvestingPro data, analyst targets for Home Depot range from $292 to $500, with the current stock price at $395.43. Based on InvestingPro’s Fair Value analysis, the stock appears to be trading above its Fair Value.
The analyst expects Home Depot to face a soft comparable sales figure for the fourth quarter of 2024, attributing this to persistent consumer pressures such as high inflation, elevated interest rates, and a shift towards services. Despite these challenges, the possibility of a modest upside remains, supported by solid retail sales observed across the industry. InvestingPro data reveals that Home Depot maintains strong fundamentals with a healthy gross profit margin of 33.5% and robust free cash flow generation. The company’s Financial Health Score stands at "FAIR," indicating resilience amid market pressures.
For the year 2025, Telsey anticipates a rebound in Home Depot’s performance. The firm projects that as comparisons to previous years’ sales become more favorable, the company will likely experience growth. The past comps were 11%, 3%, (3%), and the guidance of (2.5%) for the years 2021, 2022, 2023, and 2024 respectively.
The housing market’s recovery is also expected to contribute to Home Depot’s growth in 2025. The Telsey analyst pointed to the TAG Housing Scorecard, which suggests a housing market gaining momentum due to factors such as job and wage gains, the long-term benefits of homeownership, and an increase in inventory. Additionally, the market appears to be adapting to higher mortgage rates. With a market capitalization of $392 billion and consistent dividend payments for 38 consecutive years, Home Depot remains a prominent player in the Specialty Retail industry. For deeper insights into Home Depot’s performance metrics and growth potential, access the comprehensive Pro Research Report available on InvestingPro, which covers over 1,400 top US stocks.
Home prices, a key factor in driving home improvement spending, continue to show robust growth. According to the National Association of Realtors (NAR), the median sales price for an existing home rose by 6.0% year-over-year in December 2024. Furthermore, existing home sales, which had been declining for 37 consecutive months, turned around with year-over-year increases of 2.9%, 6.1%, and 9.3% in October, November, and December 2024, respectively.
Telsey anticipates that the positive trends in the housing market from late 2024 will support the demand for home improvement, but with a time lag. The firm projects a return to positive comparable sales for Home Depot in the first half of 2025.
In other recent news, Home Depot has made significant adjustments to its financial strategy by terminating a $1.0 billion revolving credit facility and reducing commitments under another credit line, as detailed in a recent SEC filing. This decision follows the successful acquisition of SRS Distribution Inc. and suggests a strategic shift in managing capital and debt. Meanwhile, UBS has provided insights into the upcoming earnings for Home Depot and Lowe’s (NYSE:LOW), indicating a potential stabilization in the home improvement sector, which could signify a recovery on the horizon. UBS suggests that current sales weakness might be temporary, with the potential for a robust recovery in the future.
Additionally, Truist Securities has raised its price target for Home Depot to $467, maintaining a Buy rating, citing positive trends in the company’s performance and improved sales projections. This outlook is supported by factors such as increased home equity values and consumer adjustments to the economic climate. In another development, Home Depot has partnered with Uber (NYSE:UBER) Eats to offer on-demand and scheduled deliveries of home improvement products, expanding its reach and enhancing customer convenience.
Piper Sandler also highlighted Home Depot as one of the companies likely to benefit from anticipated shifts in consumer purchasing behavior, particularly in the hardlines and broadlines sector. These recent developments reflect Home Depot’s ongoing efforts to adapt to market conditions and enhance its strategic position in the retail sector.
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