Home Depot is facing a dismal chapter as its stock takes significant hits and analysts lower their price expectations. The last two-month slump has triggered alarm bells as to whether high-income earners have begun spending less. Further compounding the impact, the great equalizer — tariffs — have created a particularly cautious outlook. Despite these near-term headwinds, analysts and company executives express confidence in Home Depot's long-term prospects, citing the aging housing stock and the company's strategic positioning as potential growth drivers.
To understate their travails, Home Depot’s shares have dropped 7% year-to-date, in line with the fears plaguing the home improvement industry. The investor-owned utility’s stock had taken a nearly 25% tumble in the two months since. This decrease matches the largest over a 15-year span, excluding early pandemic months of March and April 2020. This major decline has led some analysts to lower their expectations for the stock significantly.
That didn’t stop Piper Sandler from cutting its price target on Home Depot. They reported a drop in high-income earners’ sentiment, and that appears to be impacting their major-category spending on remodel projects. The firm lowered its price target to $418 per share from $435, attributing the adjustment to "near-term pressure from big-ticket weakness and tariffs." Piper Sandler reduced its price target for Lowe’s, a major competitor in the home improvement space.
Home Depot is doing gangbusters in the face of all this. Its deep connections to the professional contractor space and huge-ticket remodel outlays are helping it stay buoyed. Analysts at Barclays said Home Depot is in a strong position going into the month of April.
Even Home Depot CEO Ted Decker admitted that the tariffs had real, detrimental effects on their company’s operations.
"We've had tariffs forever," - Home Depot CEO Ted Decker
Decker sounded optimistic on the company’s earnings call about its potential to weather these challenges and come out better on the other side.
Even Jim Cramer, the notorious stock market commentator, is oftentimes a champion for Home Depot. He thinks the company has the potential to be one of this year’s biggest winners. Cramer stressed the increasing senior citizen demographic aging in place in outdated homes nationwide. He thinks this trend alone is enough to spur a surge in home improvement spending.
Home Depot's focus on professional contractors and large-ticket remodel spending differentiates it from competitors like Lowe's. The company has plenty of room to grow by focusing on these two demographics. Homeowners are excited to be able to invest in renovations and upgrades.
"So, the amount of work and upkeep you need to make on those houses, they've gained in value, but they need a lot of work. And we're the place to go to help people do that," - Home Depot CEO Ted Decker
Analysts expect a building peak for mega-renovation projects in 2025.
"Underlying improving health in housing and remodel trends keeps us positive on the longer-term set-up — particularly if mortgage rates continue to fall." - Piper analysts
"I think that everything is set up for this to be a huge stock in 2025," - Jim Cramer
