Home Depot Inc.’s investment strategy may be a drag on results in 2020, but analysts are bullish that it will all pay off in the long run.
But analysts see the stock decline and guidance as a “reset,” with Credit Suisse upgrading Home Depot to outperform from neutral after the event. Credit Suisse also raised its price target to $235 from $225.“Home Depot lowered fiscal year 2020 comps/margins yesterday to a level that now seems achievable, potentially beatable,” analysts led by Seth Sigman wrote. “Previously, guidance and expectations had been too high all throughout fiscal 2019.
The strategy, called “One Home Depot,” aims to create a multiplatform, seamless shopping experience with the company spending on store renovations, its professional channel and more.
Analysts rate the stock overweight with a $241 price target, down from $252. JPMorgan also notes that“[W]e believe Home Depot remains one of the best long-term stories given its initiatives, the duopolistic/Amazon-resistant nature of the industry, and operating leverage/EPS growth that accelerates in 2021 and beyond.,” analysts said.
“Assuming this continues to grow 15% to 20%, it would contribute 150 basis points to 200 basis points to Home Depot’s overall growth,” UBS said.And analysts think share buybacks will accelerate.
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