Nomura Securities Upgrades Home Depot (HD) to Buy

Nomura Securities upgraded Home Depot (NYSE: HD) from Neutral to Buy with a price target of $155.00 (from $140.00), citing significant opportunity and upside to estimates.

Analyst Jessica Schoen Mace commented, "We are upgrading The Home Depot (HD) to Buy from Neutral. While some of the strength we see is reflected in the shares at the current valuation (near the high end of its historical range, at 17.8x), we believe that market share gains, competitive advantages, a solid underlying market, and strong management all position the company well for growth and provide downside protection. We are increasing our estimates and target price."

Mace added, "The biggest change in our position from our former thesis is the previous notion that slowing home price growth posed a great risk to Home Depot’s comp. After the YoY increase in home price growth slowed to 4.4% and 5.6% in 2014 and 2015 from 13.5% in 2013, Home Depot’s comps were still solidly positive, including a high-single-digit increase in the U.S. in 2015. While we still expect home prices to decelerate (consistent with HD’s assumptions), we believe any positive growth would be a tailwind. It is one of several factors that affect the contribution from housing to HD’s sales opportunity, including housing formation, turnover, and aging housing stock."

The firm raised FY 2016 EPS from $6.30 to $6.33 and FY 2017 EPS from $7.10 to $7.15.

For an analyst ratings summary and ratings history on Home Depot click here. For more ratings news on Home Depot click here.

Shares of Home Depot closed at $127.60 yesterday.

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