Home Depot Stock (HD) Downgraded Ahead of Difficult Year End Comps

Home Depot (HD) is facing headwinds as Stifel downgraded its stock to “Hold” from “Buy,” signaling a cautious outlook for the home improvement giant. The downgrade, accompanied by a price target reduction to $370 from $440, reflects growing concerns about a potential slowdown in the home improvement sector, particularly as the company approaches challenging year-end comparisons.

Home Depot is scheduled to release its third-quarter fiscal 2025 results on Tuesday, November 18th. The markets anticipate revenue of $41.14 billion, representing a 2.29% increase from the same period last year. The consensus estimate for earnings per share (EPS) is $3.84, a 4.63% year-over-year growth.

However, these figures mask underlying challenges, including softened demand and pressure in high-ticket discretionary categories. Elevated interest rates and broader macroeconomic pressures are contributing to the cautious outlook surrounding the company's performance.

The stock is currently trading at $365.13 in today's pre-market, and is down 5.38% year-to-date. Stifel's analysts cite a “cautious bias” ahead of Home Depot's Q3 earnings report, suggesting that the home improvement category is “at best stagnant and potentially deteriorating.” This assessment casts a shadow over the company's near-term prospects, leading to the downgrade.

The company's valuation is currently under intense scrutiny, with analysts offering divergent perspectives. The consensus rating for Home Depot remains “Outperform,” with an average one-year price target of $428.31, suggesting a potential 12.48% upside. Stifel's downgraded estimates for the second half of fiscal 2025 through fiscal 2027 are now “meaningfully below consensus,” anticipating a delayed recovery in the home improvement category.

As Home Depot prepares to navigate a complex economic landscape, upcoming earnings reports and analyst evaluations will provide crucial insights into its financial health and strategic direction. The markets will be closely monitoring these developments to gauge the company's resilience and adaptability in the face of macroeconomic headwinds.

The downgrade underscores growing concerns about the company's near-term performance. The impact of this news may weigh on future sentiment, depending on the upcoming earnings call.