Retail

Oppenheimer Remains Upbeat on Home Depot

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At a breakfast meeting the company held on Thursday for sell-side analysts, Home Depot Inc. (NYSE: HD) satisfied analysts from Oppenheimer that the company is “well-positioned to capitalize successfully upon an ongoing recovery in the US housing market and strengthening demand for home improvement related products.”

Home Depot indicated that it remains focused on boosting its fourth-quarter business in what has been traditionally a slow quarter for the company. Its Black Friday ad supplement this year was a 32-page document with hundreds of items, and the company still promotes gift items in prices down to less than $20.

For shoppers looking for power tools, Home Depot is offering a $25 savings on any order of eligible Makita products totaling $100 or more. A Makita circular saw that retails for $116.95 costs just $92.95 with the discount.

Enough visions of sugar plums. Oppenheimer’s analysts had several key takeaways from the Thursday event:

  1. HD is sticking by its near- and longer-term financial forecasts articulated in its Q3 (Oct.) report and at last year’s Analyst meeting (held Dec. 8, 2015)
  2. [M]anagement indicated clearly that it does not view the recent move higher in interest rates as troublesome given still very attractive affordability measures in the US housing market
  3. Home Depot is now much more focused upon driving sales of seasonal and holiday products in the traditionally less significant fiscal fourth quarter (period ended Jan.)
  4. [T]he company is intent upon enhancing its ability to serve professional customers through a combination of more attractive finance terms and on site delivery options
  5. [C]omments imply that HD is well positioned to capitalize upon improving home improvement demand from millennials as they begin to purchase homes and tackle DIY projects.

Oppenheimer rates Home Depot stock as Outperform with a price target of $140. The stock has bounced around over the past 12 months and is up less than 4.5%, compared with a gain of 12.7% for the S&P 500 and nearly 16% for the Dow Jones Industrial Average, of which Home Depot is a component.

Home Depot’s stock closed at $135.84 on Thursday and traded up about 0.2% Friday, at $136.04 in a 52-week range of $109.62 to $139.00. The consensus price target is $146.80.

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