Telsey reiterates Outperform rating on Home Depot stock amid expected comp growth

Investing.com - Telsey Advisory Group has reiterated its Outperform rating and $455.00 price target on Home Depot (NYSE:HD) stock, which currently trades at $396. According to InvestingPro data, analyst targets range from $308 to $484, with the stock showing strong momentum as indicated by its RSI reaching overbought territory.

The research firm projects a return to positive comparable sales for both periods, noting that comparisons have eased against declines of 3.3% and 2.0% in the second quarters of 2024 and 2023, respectively, and full-year drops of 1.7% and 3.2% in 2024 and 2023. The company maintains strong financial health, with InvestingPro highlighting its 39-year track record of consistent dividend payments and 15 consecutive years of dividend increases.

Telsey anticipates home improvement demand trends will improve over time as consumers proceed with previously delayed projects despite high interest rates, particularly as life changes such as growing families, job relocations, or desired lifestyle upgrades drive renovation needs.

The firm also points to home equity values, which have increased by approximately 50% since 2019, suggesting homeowners who remain in their properties will eventually tap into this wealth for larger remodeling projects.

Despite these positive indicators, Telsey expects multiple quarters will pass before growth becomes more substantial and significantly impacts earnings, citing ongoing near-term macroeconomic headwinds and uncertainty surrounding new tariff policies. Based on InvestingPro’s Fair Value analysis, the stock appears slightly overvalued at current levels. Discover 8 additional exclusive ProTips and comprehensive valuation metrics with an InvestingPro subscription.

In other recent news, Home Depot announced it has withdrawn and refiled its Premerger Notification and Report Form under the Hart-Scott-Rodino Act for its pending acquisition of GMS Inc (NYSE:GMS). This move is intended to give the U.S. Department of Justice’s Antitrust Division more time for review. The acquisition deal values GMS at approximately $5.5 billion, or $110 per share, and is expected to be highly accretive according to Truist Securities, which maintained its Buy rating with a $417 price target. Fitch Ratings affirmed Home Depot’s ’A’ Long-Term Issuer Default Rating, noting the acquisition would modestly increase leverage but not significantly impact the company’s financial stability.

In the appliance category, Home Depot continues to gain market share, as reported by Stifel, highlighting a significant rise in pricing within this sector. This category accounts for about 9% of Home Depot’s fiscal year 2024 revenue. DA Davidson also reiterated a Buy rating and set a $450 price target following the GMS acquisition announcement. These developments reflect Home Depot’s ongoing strategic efforts to strengthen its market position and financial performance.

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