Home Depot Receives Rating Upgrade as Wedbush Predicts Stronger Demand in 2024
Home improvement retailer Home Depot (HD) has received a rating upgrade from Wedbush analysts, who have raised their outlook from Neutral to Outperform. The upgrade comes as Wedbush predicts stronger demand for Home Depot in 2024. Despite a weakened demand forecast for 2023, due to factors such as rising interest rates and declining existing home sales, analysts believe that key drivers are bottoming out or reversing, indicating a rebound in demand for the company in the following year.
Factors Point to Weaker Demand for Home Depot in 2023, but Analysts Optimistic for 2024
While 2023 may bring challenges for Home Depot, including rising interest rates and a decline in existing home sales, Wedbush analysts remain optimistic about the company’s future performance. They believe that these factors will reach their bottom or begin to reverse, laying the groundwork for a stronger demand outlook in 2024. As a result, Wedbush predicts that home improvement spending will increase by at least low-single-digit levels year-over-year by the second half of 2024, with Home Depot positioned as a prime beneficiary.
Home Improvement Spending Expected to Increase, with Home Depot Set to Benefit
Wedbush analysts anticipate that the overall spending on home improvement will see growth in the coming years. They believe that Home Depot, with its leading market position, will be well-positioned to capture a significant share of this increased spending. The analysts expect Home Depot’s Pro business segment to outperform the DIY segment in a rebounding industry environment. This is supported by healthy employment rates, solid wage growth, and continued home price appreciation, which boosts homeowner spending power. Additionally, Home Depot’s building Complex Pro initiative is expected to help the company gain further market share in the professional contractor segment.
Wedbush Raises Home Depot’s Stock Price Target, Anticipating Positive Growth Outlook
In light of their positive outlook for Home Depot, Wedbush analysts have raised the stock price target for the company. The analysts have increased the target by $50 to $380 per share. This upward adjustment reflects their belief in Home Depot’s potential for growth and success in the coming years. In pre-market trading, Home Depot shares have already risen by 1%, indicating investor confidence in the company’s prospects.
Home Depot Poised for Strong Margins and Earnings Growth, Analysts Suggest
Wedbush analysts expect Home Depot to deliver solid margin and earnings growth in the future. They anticipate better margin performance for the company, with $500 million in permanent cost cuts contributing to increased operating margins year-over-year. Wedbush also forecasts Home Depot’s operating margins for 2024 to be 14.3%, slightly higher than the consensus estimate of 14.2%. Additionally, the analysts project Home Depot’s earnings per share (EPS) for 2024 to be $15.85, surpassing the consensus forecast of $15.57.
Furthermore, Wedbush suggests that Home Depot’s mid to high-single-digit percentage EPS growth algorithm may be conservative as the market stabilizes in late 2024 and 2025. They expect that as evidence of a cyclical inflection builds, the company’s earnings growth will strengthen. Historically, Home Depot has outperformed the S&P 500 when interest rates decline, signaling stronger fundamentals.
In conclusion, Home Depot is well-positioned to benefit from a rebound in demand in 2024. Despite a weaker outlook for 2023, analysts at Wedbush are optimistic about the company’s future and have raised their rating and stock price target. They anticipate that Home Depot will outperform its competitors and achieve strong margin and earnings growth in the coming years.
Analyst comment
Positive news: Home Depot Receives Rating Upgrade as Wedbush Predicts Stronger Demand in 2024
Analysis: The market is expected to respond positively to Home Depot’s rating upgrade and the prediction of stronger demand in 2024. The stock price target has been raised, indicating investor confidence. Home Depot’s well-positioned market position and initiatives are expected to drive growth and capture a significant share of increased home improvement spending. The anticipation of strong margin and earnings growth further supports the positive outlook.
