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Analysts Favor ‘Hold’ Ratings on RH

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Dec. 4 2020, Updated 10:53 a.m. ET

Analysts’ recommendations

Of the 21 analysts that cover RH (RH) stock, 38.1% have given it “buys” as of October 8, while 57.1% have given it “holds,” and 4.8% have given it “sells.”

On the same day, analysts had an average price target of $156.94 on the stock, which represented a return potential of 41.6% from its price of $110.82.

Although RH has fallen since its announcement of its fiscal 2018 second-quarter earnings on September 4, many analysts have raised their price targets on its stock. On September 5, Stifel raised its price target from $125 to $142, Cowen and Company raised its price target from $135 to $150, and Gordon Haskett raised its price target from $172 to $175.

On September 10, KeyBanc Capital Markets upgraded the stock from “sector weight” to “overweight” with a price target of $166.

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Peer comparison

Of the 26 analysts tracking Williams-Sonoma (WSM), 3.8% have recommended “buys,” 80.8% have recommended “holds,” and the remaining 15.4% have recommended “sells” on its stock. Analysts have given WSM an average price target of $62.00, which represents a fall of 2.0% from its current price of $63.23.

Of the 22 analysts covering Bed Bath & Beyond (BBBY), 63.6% favor “holds,” and the remaining 36.4% favor “sells” on its stock. Analysts have set a price target of $15.31, which represents a potential return of 8.8% from its current stock price of $14.07.

Valuation multiple

The decline in RH’s stock price has lowered its valuation multiple. As of October 8, RH was trading at a forward PE multiple of 13.9x compared to 20.9x before the announcement of its fiscal 2018 second-quarter earnings. On the same day, its peers Williams-Sonoma and Bed Bath & Beyond were trading at forward PE multiples of 14.2x and 7.9x, respectively.

Next, we’ll look at analysts’ EPS expectations for the company over the next four quarters.

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