Home Depot Inc (NYSE: HD) is “on this path to get a little bit stronger in 2025”, says Simeon Gutman – a Morgan Stanley analyst.
The home improvement retailer has inched up in recent sessions even though its full-year outlook failed to match expectations on February 25th.
Still, Gutman is convinced that the company’s share price could climb to $450 by the end of this year, which would represent a 12% upside from current levels.
Home Depot stock is currently down about 5% versus its year-to-date high.
Why is Gutman bullish on Home Depot stock?
Morgan Stanley is bullish on HD as it came in handily above Street estimates in its fiscal Q4.
More importantly, the multinational reported positive comparable sales for the first time in two years in its fourth financial quarter.
Speaking with CNBC last week, Simeon Gutman agreed that some of this quarter’s bump was related to hurricanes and extreme weather conditions.
But even outside of that, “comps are normalising [and] everything is starting to stabilise,” he added.
Potential investors could also take heart in a 2.32% dividend yield tied to the Home Depot stock at writing, which makes it all the more attractive to own for the longer term.
Could higher interest rates weigh on HD shares?
Gutman recommends buying Home Depot stock as it’s strongly positioned to navigate higher for longer interest rates that tend to be a headwind for discretionary spending at large.
That’s because the company’s chief of finance, Richard McPhail, expects the American consumer to get used to elevated rates.
Eventually, they’ll stop delaying home improvement projects because of them, he argued in a post-earnings interview.
HD shares could benefit this year as California pushes for recovery after the LA wildfires that resulted in an estimated $28 billion to $54 billion in property damage as well.
Investors should also note that despite struggling with negative comps over the past two years, Home Depot stock is currently up more than 50% versus the start of 2023.
Home Depot Q4 earnings highlights
Home Depot earned $3.02 a share on $39.70 billion in revenue in its fiscal fourth quarter.
Analysts, in comparison, were at $3.01 per share and $39.16 billion, respectively.
For the full year, the company based out of New York expects a 1% increase in same-store sales – but its management continues to see a 2% decline in adjusted EPS in 2025.
On the plus side, however, amidst a higher mortgage rates driven sluggish housing market, HD saw its sales increase in nearly half of its product categories and across 15 of its US geographic regions (out of 19 in total) in its Q4.
Note that Morgan Stanley is not alone in keeping bullish on Home Depot stock.
The consensus rating on it currently sits at “overweight” as well.
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