Positive Trajectory for RH: Buy Rating Backed by Stabilized Demand and Free Cash Flow Prospects

Analyst Simeon Gutman from Morgan Stanley maintained a Buy rating on RH (RH – Research Report) and keeping the price target at $300.00.

Simeon Gutman has given his Buy rating due to a combination of factors that suggest RH is on a positive trajectory. The stabilization of demand trends in May and June, along with reaffirmed guidance for fiscal year 2025, provides a clearer outlook for improved earnings and free cash flow in the second half of 2025. Despite the risks associated with high leverage and excess inventory, the company’s ability to generate free cash flow for the first time in six quarters is a positive indicator.
Gutman’s analysis also considers the potential for significant upside in RH’s stock price, with a target price of $300, representing a 42% increase from the current price. The base case scenario assumes a gradual improvement in demand, supported by the rollout of new collections and a favorable demographic. This is expected to lead to revenue growth and margin improvement, resulting in higher earnings per share. Overall, these factors contribute to a favorable risk/reward profile, justifying the Buy rating.

In another report released today, Barclays also maintained a Buy rating on the stock with a $436.00 price target.