The good thing about home improvement stocks like Home Depot (HD) is that there is a case for them no matter what the broader economy is doing. In good times, Home Depot becomes a valuable means to fix up houses for flipping, or to satisfy pent-up demand. In bad times, it becomes a way to make your current space more livable as you spend more time there. That is a bit of why Jefferies analysts hiked their price target on Home Depot, though investors were less than pleased. Investors actually sent shares down fractionally in Monday afternoon’s trading.
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Jefferies analysts hiked the price target on Home Depot from $456 per share to $460 instead, citing recent “…record-setting activity in the Home Equity Line of Credit (HELOC) market…” as the main driver. The reports suggested that the gains in HELOC were enough to spark up a hike to its “…multi-year forecast for repair & remodel industry spend.”
Further, the market itself contributed to Jefferies’ assessment. Jefferies analysts noted “…the market has been discounting the EPS tailwind for HD…with no clear shift in homeowner mindset toward monetization.” But that is likely changing. It might be a bridge too far to suggest that all that HELOC activity is going toward home renovation and repair—some of it may just be going to paying the bills—but certainly some of it is. That in turn means more cash going into Home Depot, along with its competitors in the market space like Menards.
Home Designers Love This Aisle
And all that HELOC money has to go somewhere, you know. So where do home designers like to go most when they hit a Home Depot store? It is not the paint aisle, or even the tile section. As it turns out, it is the garden supply section that most draws their interest.
With so many upscale and “boutique” garden supply stores available, why Home Depot? As it turns out, Home Depot plants are actually both affordable and versatile, with a wide variety of species available for purchase from fiddle leaf figs to ficus trees. And, given how affordable these plants are, that makes their purchase that much more viable. Just to top it off, the plants are fully grown, which means they are ready to go as-is.
Is Home Depot a Good Long-Term Buy?
Turning to Wall Street, analysts have a Strong Buy consensus rating on HD stock based on 18 Buys and six Holds assigned in the past three months, as indicated by the graphic below. After a 3.24% rally in its share price over the past year, the average HD price target of $428.74 per share implies 16.92% upside potential.
