It is a safe bet that most of us have, at one time, been offered an extended warranty on a product. While this sounds like a good idea in some cases, most of the time, it really is not. And for home improvement giant Home Depot (HD), a new class action lawsuit says it was a very good idea…for Home Depot. But despite this lawsuit, investors are still very much on board. In fact, investors sent Home Depot shares up another 2% in Wednesday afternoon’s trading.
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The new class action lawsuit, reports note, was brought forward by plaintiff Randall Simmons, who alleged that Home Depot was effectively “forcing” customers to pay for optional damage protection fees as part of its tool rental service. While it is possible to decline the service, the suit noted, the fees are still forced in place.
Simmons noted that the fees result in “…tens of millions of dollars each year” for Home Depot, and that by forcing the fee to remain, Home Depot is inflating its revenue significantly. Simmons is seeking “…declaratory and injunctive relief and an award of compensatory damages, attorney’s fees, costs and other relief the court deems proper,” reports noted.
A Closer Look at Home Renovation
With Home Depot set to report its earnings next week, analysts are already considering the broader market, and how Home Depot can fare in the face of changing conditions. Telsey Advisory Group analyst Joe Feldman—who has a five-star rating on TipRanks—recently weighed in on Home Depot and its likely outcomes.
Feldman held the line, keeping the Outperform rating in place and leaving its price target of $455 per share similarly alone. Feldman noted, “We anticipate home improvement demand trends improving over time, as consumers stop putting off projects despite high interest rates, eventually getting used to the rates as opposed to waiting for them to fall.” While the idea of falling interest rates may be closer to hand than expected—President Trump is pushing for them—this would likely be a point that only benefits home improvement projects.
Is Home Depot a Good Long-Term Buy?
Turning to Wall Street, analysts have a Strong Buy consensus rating on HD stock based on 19 Buys and six Holds assigned in the past three months, as indicated by the graphic below. After an 11.34% rally in its share price over the past year, the average HD price target of $429.89 per share implies 6.233% upside potential.
