In a report released on May 14, Andy Sim from DBS maintained a Hold rating on Home Depot (HD – Research Report), with a price target of $376.00.
Andy Sim has given his Hold rating due to a combination of factors, including Home Depot’s strong position as the largest home improvement retailer and its plans for growth. Despite Home Depot’s robust market share and a strategy that encompasses digital transformation and Pro customer engagement, there are concerns about near-term growth prospects. High interest rates and a deceleration in consumption growth have led to modest guidance for the company, with approximately 1% diluted EPS growth expected for 2024. Additionally, the acquisition of SRS Distribution Inc. is strategic but will cause a temporary halt in share repurchases as the company focuses on deleveraging.
Moreover, Sim’s analysis indicates that while Home Depot has a solid track record with a 7% revenue CAGR over the past decade, the immediate future presents some challenges. The company’s sales saw a decline in the previous year, and the prevailing economic conditions may continue to temper demand for larger scale home improvement projects. However, management’s guidance suggests some recovery with a 1% sales growth for 2024. Despite these factors, the stock’s premium valuation and the company’s superior execution are reasons for the Hold rating, with a target price of US$376. Upside risks could emerge if interest rates fall more than expected, potentially boosting project spending and sales for Home Depot.
In another report released yesterday, Loop Capital Markets also reiterated a Hold rating on the stock with a $360.00 price target.
HD’s price has also changed moderately for the past six months – from $303.630 to $340.500, which is a 12.14% increase.
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Home Depot (HD) Company Description:
Home Depot, Inc. is a home improvement retailer, which sells building materials, home decor, flooring, appliances, lawn and garden products, tools and other merchandise. It also offers installation services as well as tool and equipment rental. The company was founded by Bernard Marcus, Arthur M. Blank, Kenneth Gerald Langone and Pat Farrah on June 29, 1978 and is headquartered at Atlanta, GA.
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