Telsey Downgrades Home Depot (HD) to Market Perform, 'we don't expect it to outperform the market in the near term'

Telsey analyst Joseph Feldman downgraded Home Depot (NYSE: HD) from Outperform to Market Perform with a price target of $315.00.

The analyst comments "Downgrading HD to Market Perform from Outperform: In the near term, we expect Home Depot to experience a slightly steeper slowdown related to the weak housing market trends (see TAG Housing Scorecard published today), consumers remaining cautious with spending, especially on big ticket items and projects, and continued normalization from the strong COVID-19 and government stimulus related gains from past three years—resulting in our lower 2023 and 2024 financial estimates. While the stock likely reflects much of the negative news and challenging operating environment, including a bottoming housing market, we don't expect it to outperform the market in the near term, given the run it has had since May 2023 (up ~17% since May 16) and the current valuation—trading at an NTM P/E multiple of ~21.2x vs. the 1-year average of ~18.5x and the 3-year average of ~20.8x. Recall, from 2019 to 2022, Home Depot's stock price outperformed, increasing 63% vs. 35% for the S&P 500, driven by superior EPS growth over that time of 45% vs. 19% for the S&P 500. Home Depot may have a tough time maintaining its stock price outperformance in the near term, given our revised estimates call for 2023 EPS to decline 11% (FS -10.3%) before growing 7% (FS +6.4%) in 2024 vs. the current S&P 500 FactSet (FS) consensus of +1.6% and +11.8%, respectively."

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 $329.17 yesterday.

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