Why Analysts Favor a ‘Buy’ for Home Depot

Rajiv  Nanjapla - Author

Dec. 4 2020, Updated 10:43 a.m. ET

Target price

Despite the recent surge in Home Depot (HD) stock, analysts have lowered their 12-month target price. As of September 11, 2017, analysts are expecting Home Depot (HD) stock to reach $170.54 in the next 12 months, which represents a return potential of 7.7% from its current stock price.

Before HD’s announcement of its 2Q17 earnings, analysts forecast the 12-month target price at $171.27. The entry of Amazon (AMZN) into the appliance sector could have prompted analysts to lower their target price.

The 12-month target price and return potential of Home Depot’s peers are as follows:

  • Lowe’s Companies (LOW): target price of $83.84 with a return potential of 8.2%
  • Bed Bath & Beyond (BBBY): target price of $32.32 with a return potential of 16.8%
  • Williams-Sonoma (WSM): target price of $50.16 with a return potential of 5.3%
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Analysts’ ratings

Of the 31 analysts that follow Home Depot stock, 74.2% are recommending a “buy,” and 25.8% are recommending a “hold.” None of the analysts are recommending a “sell.” On August 16, 2017, after HD’s announcement of its 2Q17 earnings, Raymond James raised its rating from “market perform” to “market outperform” and maintained its target price of $165.

Home Depot’s current stock price is lower than analysts’ 12-month target price. However, that doesn’t mean an automatic “buy.” Investors have to carefully evaluate the various analysts’ estimates covered in the previous parts of this series before making any investment decisions.

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