Restoration Hardware (RH) Remains Top Idea at Wells Fargo

March 28, 2014 1:18 PM EDT
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Price: $29.38 +1.66%

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Wells Fargo reiterated an Outperform rating on Restoration Hardware (NYSE: RH) with a price target of $82-$85. Analyst Matt Nemer said the stock remains a top idea. Comments follow Q4 results.

"RH reported an exceptional quarter, in our view, and provided strong guidance, but it was easy to miss in the headline (revenue was below guidance). What was so great about it? First, comparable brand growth of 24% was the second highest “comp” in FQ4 for all of retail (behind only Conn's at 33%). Second, the company demonstrated the ability to quickly react to the environment and was able to manage SG&A expense dollars to same level as FQ3 despite $75MM of additional revenue (profit flow through was 60% yr/yr versus 20-45% last few years)," said Nemer.

"Furthermore, the company provided very bullish guidance and hired a new senior executive with significant operational, financial, and international experience. RH remains our favorite idea. We are adjusting our estimates as follows: FQ1 goes to $0.11 from $0.05, FY2014 goes to $2.22 from $2.11, and FY2015 goes to $2.85 from $2.75. Our valuation range remains at $82-85," he added.

For an analyst ratings summary and ratings history on Restoration Hardware click here. For more ratings news on Restoration Hardware click here.

Shares of Restoration Hardware closed at $63.81 yesterday.

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