Home Depot Inc. (HD) investors are ending the year with a frown as shares fell almost 10% in 2025, materially underperforming the S&P 500 (SPX), which is up over 17%. While the company remains exceptionally well-positioned from a competitive and structural standpoint, the near-term setup makes it difficult to turn bullish at this stage. As a result, I remain neutral on Home Depot, balancing confidence in the long-term recovery with caution around the timing of a meaningful inflection.
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Home Depot continues to gain share within home improvement retail, supported by scale, logistics, and service advantages that few competitors can match. However, the broader housing and macro environment still needs to cooperate for that strength to translate into accelerating growth.
Stable Trends, but No Clear Near-Term Catalyst
Current operating trends appear stable, but they are not yet strong enough to justify a more constructive stance. Comparable sales have stopped deteriorating, which is encouraging, yet growth remains muted. While I am highly confident that home improvement demand will eventually accelerate meaningfully, calling the precise timing of that inflection is difficult. Expectations for a rebound in U.S. home sales next year could ultimately pull Home Depot back into a healthier growth profile, but ongoing economic uncertainty has complicated the outlook.
In a genuine recovery scenario, Home Depot has significant operating leverage. If the environment improves and the housing market reaccelerates, the company could reasonably deliver comparable sales of roughly 4.5%, total sales growth of about 5.5%, and mid- to high-single-digit EPS growth. That outcome would likely unfold over multiple years and could exceed what management has currently outlined. However, until there is more unmistakable evidence that such a recovery is underway, a neutral stance feels appropriate.
Potential Near-Term Supports, but Not a Full Inflection
After a sharp stock drop from mid-September highs, I believe several factors could help stabilize sentiment in the coming months. The end of the government shutdown, holiday seasonality, and a potentially stronger-than-usual tax refund season may provide modest support for spending trends. Additionally, the U.S. housing stock continues to age, which reinforces the long-term need for repair and maintenance spending. Some of that demand should eventually filter into the system, even if it does so gradually.
That said, broader macro forces remain a headwind. Easing interest rates will probably lack the momentum needed to unlock a rapid rebound in housing turnover. At the same time, consensus financial forecasts already assume a return to normalized growth and near-peak profitability over the next several quarters, which limits the potential for near-term upside surprises.
Competitive Positioning Remains a Long-Term Strength
Despite near-term sluggishness, Home Depot’s competitive advantages remain intact. The company has largely completed its multi-year investment cycle in distribution, delivery, and service infrastructure. That build-out has created an unrivaled supply chain network that is extremely difficult for smaller competitors to replicate. With more than 16,000 delivery assets and increasing speed to customers and job sites, Home Depot has meaningfully improved its service levels. Today, more than half of in-stock SKUs can be delivered same or next day, a dramatic improvement versus just a few years ago.
This infrastructure advantage should continue to drive share gains, particularly against smaller wholesalers that lack the scale to provide comparable availability, speed, and service.
Notably, while the physical build-out is largely complete, Home Depot continues to add capabilities market by market to deepen relationships with Pro customers. Of the company’s roughly nine million Pro customers, only a small fraction currently participates in its trade credit program. Customers on trade credit tend to spend meaningfully more, suggesting substantial upside in wallet share as adoption expands.
Valuation Reflects Investor Caution on Home Depot
From a valuation perspective, Home Depot traded at a modest premium compared to its peers. The stock trades at a P/E ratio of roughly 24x and an EV-to-EBITDA multiple of around 16x, above the sector medians of approximately 17x and 12x, respectively.
Using a blend of valuation approaches, including earnings and cash-flow based models, I estimate fair value at approximately $345 per share, implying just around 3% downside from current levels. This suggests the stock is roughly fairly valued today.
Is Home Depot a Buy, Sell, or Hold?
According to leading Wall Street analysts tracked by TipRanks, the average rating on Home Depot is Moderate Buy, with 17 Buy, 5 Hold, and 1 Sell rating, obtained over the past three months. The consensus price target stands at $401.85, implying 16.5% potential upside from the current price.
Neutral Until the Inflection Becomes Clearer
Home Depot is exceptionally well-positioned for the next upcycle in home improvement, with unmatched scale, logistics, and Pro capabilities. In the longer term, I remain constructive on the business and believe earnings leverage could be meaningful once demand accelerates. However, the timing of that inflection remains uncertain, and near-term growth is still constrained by macro and housing dynamics.
Given the valuation and the lack of a clear near-term catalyst, I remain neutral on Home Depot for now. The stock looks like a high-quality name to own when the recovery becomes more visible, but patience is likely required before that opportunity fully materializes.