How Much Upside Is Left in Home Depot’s Stock Price?



Stock performance

After posting its first-quarter earnings on May 15, Home Depot (HD) saw its stock price fall to $184.01 on May 30. Although Home Depot outperformed analysts’ EPS expectations, its stock fell due to lower-than-expected sales and same-store sales growth.

However, rising mortgage rates and low housing inventory due to soaring lumber prices have increased the demand for existing houses, driving their values up. The increase in housing prices has prompted homeowners to renovate their houses, driving home improvement retailers’ sales. The expectation of an increase in sales and the measures adopted by Home Depot’s management to drive its sales have increased investors’ confidence, driving the company’s stock price. By the end of June 12, Home Depot was trading at $201.31, a rise of 9.4% from the low it saw on May 30.

Year-to-date performance

In 2017, Home Depot stock rose 41.4%. Continuing on this momentum, the company has returned 6.2% since the beginning of 2018. During the same period, its peers Lowe’s (LOW), Williams-Sonoma (WSM), and Bed Bath & Beyond (BBBY) have returned 8.1%, 20.0%, and -7.3%, respectively. The broader comparative SPDR S&P 500 ETF (SPY) and SPDR S&P Homebuilders ETF (XHB) have returned 4.2% and -5.5%, respectively.

Series overview

In this series, we’ll look at analysts’ revenue and EPS expectations for Home Depot for the next four quarters. We’ll also cover its management’s guidance for 2018. We’ll end the series by looking at analysts’ recommendations and the company’s valuation multiple.

Let’s start our analysis by taking a look at analysts’ revenue expectations for HD.

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