Wall Street analysts feel good about one of our retail stocks but are worried about another. News from Home Depot Telsey Advisory Group, a leader in retail industry analysis, raised its rating on Home Depot stock to buy equivalent to outperform on Friday. The research firm also raised its 12-month price target to $455 per share from $360, which would imply an upside of nearly 14% from Thursday’s closing price. Home Depot will report third-quarter results before the market opens on Tuesday. HD YTD mountain HD stock performance so far this year. Telsey expects “continued softness” in sales in the third quarter, but analysts predict strong earnings and revenue growth in 2025, driven by lower mortgage rates, continued hurricane recovery efforts and high economic growth similar to the post-pandemic period. The ease with which needs can be compared. Telsey analysts said these catalysts, combined with Home Depot’s strong business fundamentals, should continue to help the company gain share in the home improvement market. They highlighted the further growth of the company’s specialized business supporting larger and more complex projects. Telsey expects Home Depot to outperform the S&P 500 in 2025. Increased confidence in Home Depot. The Fed’s easing of monetary policy, including another rate cut on Thursday, should lead to cheaper mortgages and a stronger housing market. Home builders rely on Home Depot, and so do new homeowners doing renovation projects. Shares of Home Depot rose more than 2.5% this week amid a broader market rally triggered by a quick resolution to the presidential election. The stock has largely been rising since disappointing earnings and guidance in August. Jim Cramer has argued for months that Home Depot would be a major beneficiary of the Federal Reserve’s loose policies. However, bond yields remained elevated ahead of Thursday’s rate cut, removing that catalyst as mortgage lending was pushed higher. During Friday’s morning meeting, Jim said Home Depot stock could eventually hit Telsey’s $455 price target because there’s a lot to like about the company right now. Club has a price target of $420. To be sure, there is typically a six- to nine-month lag between the Fed’s first rate cut in September and the housing market improving. This means investors must be patient. Jim said he doesn’t want people to sell Home Depot stock when they see next week’s earnings. He acknowledged that they “are not going to do very well,” but stressed that “it’s the outlook that matters.” Citigroup lowered its price target on Best Buy to $109 a share from Friday’s $115 a share, while maintaining its price target on the stock. Buy rating for the stock. BBY YTD Mountain Best Buy stock’s year-to-date performance. Analysts see President-elect Donald Trump’s promised tariffs on China as a “near-term threat” to Best Buy, a retailer with a large stock of imported products from the world’s second-largest economy. This isn’t entirely a bad thing. Citi said the artificial intelligence-driven technology refresh cycle “remains unchanged” and should boost revenue and same-store sales as customers turn to Best Buy to upgrade their smartphones and computers. The big picture Under Trump, higher tariffs, especially on China, are expected to be part of his economic strategy. Any new tariffs on Chinese imports would pose a challenge to Best Buy because the electronics retailer makes much of its inventory in China. Best Buy shares fell about 2.5% this week. We cut our position in Best Buy ahead of the election – locking in profits after the stock rebounded from its August 5 lows on rate cut optimism. Bottom Line Despite Citi’s concerns, we’re sticking with Best Buy. We continue to believe that technology refresh cycles are a tailwind for retailers as consumers seek to purchase the latest AI-powered gadgets. If home sales pick up again, Best Buy should be able to benefit from lower interest rates. That will drive purchases of appliances, TVs and big-ticket items sold by Best Buy — just like we think of Home Depot and its home building and home improvement products. Best Buy will report quarterly results on Nov. 26. As a Jim Cramer subscriber, you will receive trade alerts before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling stocks in his charitable trust portfolio. If Jim talked about a stock on CNBC TV, he would wait 72 hours after issuing a trade alert before executing the trade. The investment club information above is subject to our Terms and Conditions and Privacy Policy and our Disclaimer. No fiduciary duty or obligation is created or created by any information you receive in connection with the Investment Club. No specific results or profits are guaranteed.
A Home Depot store in Washington, DC, United States, Monday, August 12, 2024.
Shen Ting | Bloomberg | Getty Images
Wall Street analysts feel good about one of our retail stocks but are worried about another.
