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RH: Why Analysts Favor a ‘Hold’ Rating

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Analyst recommendations

Of the 21 analysts covering RH (RH), 38.1% have given it a “buy” rating as of September 27, and 57.1% have given it a “hold.” About 4.8% have given it a “sell” rating. That same day, analysts set an average price target of $157.29, which represents a return potential of 18.3% from its stock price of $132.99.

On September 10, KeyBanc upgraded RH from “sector weight” to “overweight” and set a price target of $166. On September 5, Stifel raised its price target from $125 to $142, Cowen and Company increased its price target from $135 to $150, and Gordon Haskett raised its price target from $172 to $175.

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Peer comparisons

Of the 26 analysts tracking Williams-Sonoma (WSM), 3.8% have recommended a “buy,” 80.8% have recommended a “hold,” and the remaining 15.4% have rated it a “sell.” Analysts have an average price target of $62.05, which represents a fall of 5.2% from its current stock price of $65.48.

Of the 22 analysts covering Bed Bath & Beyond (BBBY), 4.5% are favoring a “buy,” 59.1% are favoring a “hold,” and the remaining 36.4% are favoring a “sell.” Analysts have set a price target of $15.31, which represents a potential return of 3% from its current stock price of $14.86.

Valuation multiple

The decline in RH stock has brought down its valuation multiple. As of September 27, RH was trading at a forward PE multiple of 16.8x compared to 20.9x before the announcement of its second quarter of fiscal 2018 earnings. That same day, peers Williams-Sonoma and Bed Bath & Beyond were trading at forward PE multiples of 14.7x and 7.1x, respectively.

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