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Wall Street analysts are feeling good about one of our retail stocks but worried about another. News on Home Depot Telsey Advisory Group, a leader in retail industry analysis, upgraded Home Depot stock to Buy-equivalent Outperform on Friday. The research firm also increased its 12-month price target from $360 to $455 per share, implying an upside of nearly 14% from Thursday’s close. Home Depot is expected to report its third-quarter results before the opening bell on Tuesday. HD Mountain HD stock performance year to date. While anticipating “continued weakness” in third-quarter sales, Telsey analysts forecast strong earnings and revenue growth in 2025, driven by falling mortgage rates, continued hurricane recovery efforts and easier comparisons with the strong demand of the post-pandemic period. These catalysts, combined with Home Depot’s strong business fundamentals, should continue to help the company gain market share in the home improvement space, Telsey analysts said. They highlighted the continued growth of the company’s professional activities, which support larger and more complex projects. Telsey projects Home Depot will outperform the S&P 500 in 2025. Shares have gained nearly 17% this year – currently underperforming the benchmark index’s more than 25% advance in 2024. The big picture Confidence increased of Telsey in Home Depot is part of a context of economic resilience. and moderate inflation. The Federal Reserve’s easing of monetary policy, which included another interest rate cut on Thursday, is expected to lead to cheaper mortgages and a stronger housing market. Home builders rely on Home Depot, as do new homeowners working on remodeling projects. Home Depot shares rose more than 2.5% this week as part of the overall market rally sparked by the rapid resolution of the presidential election. The stock is largely up since the disappointing results and forecasts in August. Jim Cramer has been saying for months that Home Depot will be one of the biggest beneficiaries of the Fed’s easing. However, stubbornly high bond yields ahead of Thursday’s rate cut derailed that catalyst as mortgage lending was held higher. During Friday’s morning meeting, Jim said that Home Depot shares could eventually reach Telsey’s price target of $455, given that there is a lot to like in the company right now . The Club’s price target is $420. To be sure, there is typically a six to nine month lag between the Fed’s first rate cut, in September, and when the housing market is expected to improve. This means investors need to be patient. Jim said he doesn’t want people to sell Home Depot stock when they see next week’s earnings. While acknowledging that they “won’t be great,” he stressed, “it will be the perspectives that count.” Best Buy news Citi lowered its Best Buy price target to $109 per share from $115 on Friday while maintaining its Buy rating on the stock. BBY YTD Mountain Best Buy stock performance since the beginning of the year. Analysts say President-elect Donald Trump’s promised tariffs on China are a “short-term overhang” for Best Buy, a retailer heavily exposed to imports from the world’s second-largest economy. It’s not all bad. Citi said the artificial intelligence-driven technology replacement cycle, which is expected to boost profits and same-store sales as customers turn to Best Buy to upgrade their smartphones and computers, “remains intact “. Overview Under Trump, higher tariffs, particularly against China, are expected to be part of his economic plan. Any new tariffs on Chinese imports would pose a challenge for Best Buy because much of the electronics retailer’s inventory is made in China. Best Buy shares fell about 2.5% this week. Before the election, we reduced our Best Buy position and locked in profits after the stock rallied from its August 5 low on rate cut optimism. Bottom Line Despite Citi’s concerns, we remain loyal to Best Buy. We remain convinced that the technology replacement cycle is an asset for the retailer as consumers look to purchase the latest AI-powered gadgets. Best Buy should be well-positioned to benefit from lower interest rates if home sales recover. This would boost purchases of appliances, TVs and big-ticket items sold by Best Buy – much like we think would be the case for Home Depot and its building and home improvement products. Best Buy releases its quarterly results on November 26. (Jim Cramer’s charitable fund is long HD, BBY. See here for a complete list of stocks.) As a subscriber to CNBC Investing Club with Jim Cramer, you will receive a trade alert. before Jim made a trade. Jim waits 45 minutes after a trade alert is sent before buying or selling a stock in his charity’s portfolio. If Jim talked about a stock on CNBC TV, he waits 72 hours after the trade alert is issued before executing the trade. 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A Home Depot store in Washington, DC, United States, on Monday, August 12, 2024. Home Depot Inc. is scheduled to report earnings on August 13.
Ting Shen | Bloomberg | Getty Images
Wall Street analysts are feeling good about one of our retail stocks but worried about another.
