Home Depot is coming off a challenging 2024, with rising interest rates and cautious consumers. But over time, signs of recovery emerged, driven by rising home sales and pent-up demand in the home improvement market, setting the stage for a rebound in 2025. Year-to-date results: Up 12% Forward P/E: 25 vs. five-year average of 21.5 Our rating: Equivalent to Buy 1 Our price target: $440 per share HD YTD mountain Home Depot Year-to-date results . ’24 Review Home Depot had a rollercoaster year in 2024, starting slowly in a high-rate environment before finding momentum later in the year. The stock had a weak first half as rising borrowing costs weighed on large home improvement projects. That began to change in March, when expectations of multiple rate cuts from the Federal Reserve boosted sentiment and pushed up stock prices. However, those gains were short-lived as investor expectations reset in May. The real turning point came in mid-September, when the Federal Reserve slashed interest rates by 50 basis points, kicking off the monetary easing cycle. That’s fueling optimism about home transaction volumes, which hit a 30-year low earlier this year. Home Depot’s stock price climbed steadily, hitting an intraday record high of nearly $440 on November 26. The S&P 500 has been relatively flat during this period. Still, Home Depot is one of Jim Cramer’s 12 core holdings. We began buying Home Depot in early September, betting that falling mortgage rates could spur activity in the sluggish housing sector. Although the Federal Reserve will cut interest rates twice more in 2024, by a total of 100 basis points, or 1 percentage point, the 10-year Treasury yield remains high. Mortgage rates are affected by bond yields, so home loan costs also remain high, delaying expectations for a recovery in housing formation and subsequent Home Depot business. ’25 Outlook Home Depot is gearing up for a comeback in 2025, and early signs of recovery are already evident. The company’s third-quarter results, released in mid-November, suggested its business was bottoming out and expected to see positive changes next year. Demand for home improvement projects is expected to rise as home closings pick up, driven by an eventual drop in mortgage rates. The Fed is expected to cut interest rates two more times in 2025. Whether you’re a professional contractor or a do-it-yourself shopper, The Home Depot remains the premier destination for home improvement supplies. We prefer Home Depot to Lowe’s competitors because of its greater exposure to the specialty market. Home Depot has strengthened its presence among specialty contractors with its recent acquisition of SRS Distribution, a network of independent roofing and building supplies distributors. Interest rates remain key to Home Depot’s turnaround. If mortgage rates drop below 6%, the company’s comparable sales should return to positive territory in time, reversing the weakness in large projects. The prospect of further easing from the Fed could support the stock, as home improvement stocks tend to rise as interest rates fall, as they have an inverse relationship. Next should be earnings growth for Home Depot. But there are risks that long-term bond yields, which mortgage rates more closely track, will continue to rise. That could delay Home Depot’s return to growth. While Home Depot may run into some tariff issues as it relates to its operations in Mexico, Canada and China, the retailer shouldn’t be as vulnerable given that more than half of its portfolio comes from the U.S. (Jim Cramer’s Charity Trust Fund Long HD. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his Charitable Trust Portfolio. If Jim talks about a stock on CNBC TV, he waits 72 hours after sending a trade alert. , and then execute the transaction. The above Investment Club information 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 Investment Club. Specific results or profits.
A Home Depot store in Washington, DC, United States, Monday, August 12, 2024.
Shen Ting | Bloomberg | Getty Images
home depot After a challenging 2024, interest rates are rising and consumers are cautious. But over time, signs of recovery emerged, driven by rising home sales and pent-up demand in the home improvement market, setting the stage for a rebound in 2025.
