As of December 22, 2017, Home Depot (HD) was trading at $188.13. That same day, analysts were expecting the stock to reach $190.10, which represents a rise of 1.1% from its current stock price.
Before Home Depot announced its 3Q17 earnings, analysts had forecast a target price of $172.83. They may have raised their target price due to better-than-expected 3Q17 earnings, higher 2017 guidance, and expectations of hurricane-related sales, which they expect to continue in the next few quarters. On December 17, 2017, BMO Financial Group raised its target price from $176 to $191. On December 7, 2017, Raymond James raised its target price from $180 to $200.
The target prices and return potentials of Home Depot’s peers are as follows:
- Lowe’s (LOW): target price of $88.17, which represents a fall of 3.3% from its current stock price
- Williams-Sonoma (WSM): target price of $49.35, which represents a fall of 6.1% from its current stock price
- Bed Bath & Beyond (BBBY): target price of $22.78, which represents a rise of 1.6% from its current stock price
Of the 36 analysts following Home Depot, 77.8% are recommending a “buy,” and the remaining 22.2% are recommending a “hold.” None of the analysts are rating it a “sell.” Currently, Home Depot is trading below analysts’ target price. However, that doesn’t mean an automatic “buy.” Investors should carefully analyze various parameters discussed in the previous parts of this series before making any investment decisions.
For our analysis, we’ve chosen the forward PE (price-to-earnings) multiple due to the high visibility of Home Depot’s earnings. On December 22, 2017, Home Depot was trading at a forward PE multiple of 22.9x. During the same period, its peers Lowe’s (LOW), Williams-Sonoma (WSM), and Bed Bath & Beyond (BBBY) were trading at forward PE multiples of 17.9x, 14.1x, and 8.2x, respectively.