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Analysts Favor ‘Buy’ for Home Depot

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Analysts’ recommendations

Of the 34 analysts covering Home Depot (HD), 73.5% recommend “buy,” and 26.5% recommend “hold.” None recommend “sell.” Their average 12-month PT (price target) of $203.93 implies a 13.7% upside from its January 11 closing price of $179.41.

This month, RBC raised Home Depot’s PT from $191 to $196, while UBS lowered its PT from $220 to $200. After Home Depot announced its third-quarter earnings on November 13, Credit Suisse, Baird, Stifel, and Telsey Advisory Group cut their PTs. Bank of America Merrill Lynch downgraded the stock from “buy” to “neutral,” and lowered its PT from $219 to $195.

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Peer comparison

Of the 32 analysts covering Lowe’s (LOW), 71.9% recommend “buy,” and 28.1% recommend “hold.” Their average 12-month PT of $111.86 implies a 15.0% upside from the stock’s current price of $97.30.

Of the 24 analysts covering Williams-Sonoma (WSM), 4.2% recommend “buy,” 79.2% recommend “hold,” and 16.7% recommend “sell.” Their average 12-month PT of $55.50 implies a 5.4% upside from the stock’s current price of $52.81.

Of the 22 analysts covering Bed Bath & Beyond (BBBY), 63.6% recommend “hold,” and 36.4% recommend “sell.” Their average 12-month PT of $13.40 implies a 12.0% downside from the stock’s current price of $15.23.

Valuation

As of January 11, Home Depot’s forward PE multiple was 17.5x, compared with 23.0x at the beginning of last year. Home Depot’s stock price decline lowered its valuation multiple. On the same day, Lowe’s, Williams-Sonoma, and Bed Bath & Beyond had forward PE multiples of 16.3x, 11.9x, and 16.3x, respectively.

Home Depot’s EPS are 18.3 times analysts’ 2018 expectations, and 17.4 times their 2019 expectations. They estimate that its EPS rose 31.4% last year, and that they will rise 4.9% this year. Next, we’ll look at Home Depot’s strategies and analysts’ revenue expectations.

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