Courtesy of Home Depot
Home Depot shares will rise 15% since Tuesday’s close, as coronavirus blockades increase the popularity of home renovation projects, Bank of America analysts were told Wednesday.
The team led through Elizabeth Suzuki raised the bank’s value target for Home Depot to $330 from $290 and improved stocks to “buy” from “neutral” on a note to customers. DIY activities increase the pandemic as other people trapped at home spend time on improvement projects. The elevator faces some risks, but Home Depot now represents a great buying opportunity for investors interested in house games, Bank of America said.
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The store is surpassing Wall Street’s second quarter estimates. On Tuesday, the company reported record income and false earnings, and cited home stay plans as a key factor in its superior performance. The shares traded upwards on the news before cutting profits in the low-volume session.
Home Depot shares have risen more than 80% since its March lows, however Bank of America sees five reasons why it is not too late to own the shares. A resurgence in professional outsourcing activity due to delayed projects is expected to increase hardware sales, analysts said, as almost part of Home Depot’s sales are for professionals. Consumers also deserve to spend more of their source of income on home renovations by reducing their spending on other activities such as catering.
Home buying activity among millennials also bodes well for the retailer, analysts said. Bank of America’s latest Generation Y survey found that 70% of respondents would likely buy a home in the next two years. With loan rates close to historic lows, a frenzy over buying a home can attract more consumers to retailers by adding Home Depot.
“We expect large, well-capitalized home improvement stores, such as Home Depot, to be the biggest beneficiaries of retail trends and after COVID-19,” analysts said.
Finally, Bank of America considers inventory to be simply cheap. Home Depot trades at a price-to-earnings ratio of approximately 24x, a 19x premium/retail ratio and the company’s five-year average of 20x. But this point is justified, according to analysts, “given the superior foundations of the industry” and the superior performance of renewal in other sectors.
“Compared to the rest of the market, HD equities don’t seem particularly expensive, especially since it’s a leading company in the sector with favorable winds in the sector that support the rise,” they added.
Home Depot is listed at $283.12 in line with the steady percentage at 11:05 a.m. ET on Wednesday, up 31% since the beginning of the year.
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