The broader market slump in early February was difficult for home depot Inc. (US:high definition). After reaching a high around $207.50 in late January, HD stock milled to $175 in the next few trading sessions. This decrease 15.6% hardly seems fair, especially considering that home depots have still not recovered.
In fact, the stock is now below $ 175, recently closing at $172.80, nearly 17% from the highs. Let’s look at why sales is unfair and why HD in stock to Buy now.
The best house in a bad neighborhood
Let’s be honest, retail is not a great investment over the last year. Amazon.com Ink. (Nasdaq:events of the week) rose to dominance for a disruptive e-Commerce wave.
Many were wounded, but not crushed, as Maki Inc. (US:m) and Kohl’s Corporation (Ticker NYSE:KSS), while the other rope as Sears holdings Corp. (code Nasdaq:work) and J. C. Penney company Inc (Ticker NYSE:JCP).
Although, surprisingly, home depot and served as a support in a retail shake. Consumers can buy DEWALT drill or black and Decker Sander on Amazon, right? Since home depot was able to hold up?
The company relies on a rather “UN-Amazon-possible” business model. This means that, although Amazon can to sell you a technique or drill, most people still find comfort in heading to the home depot or Lowe’s responsibility, Inc. (TICKER NYSE:LOW).
We are not going to order the lumber or mulch on Amazon and the Contractor is not going to buy a box of nails or a new pipe, plumbing fixtures online. Home depot, in particular through its own e-Commerce and multichannel, it’s just too easy for vendors and buyers to purchase goods, which he sells retail.
It also shows in their work. Home depot won earnings, and income for six consecutive quarters. In the last quarter, comparable sales grew by 7.5% against expectations of 6.5%. Obviously, as costco Wholesale Corporation (indexcost), home depot has a business model that was not necessarily invincible on Amazon, but failed, isolating it.
Spring “Vacation” Here
Spring shopping season brings customers to the home depot for patio equipment, grills, lawn mowers, warm weather projects and gardening.
While the following income statement for home depot will be its fiscal first quarter, the second quarter will capture the spring season. Do you know the fiscal second quarter of BG is its largest quarter for sale?
On the front analysts they expect revenue growth of 6.8% in 2018 and 4% in 2019. Earnings expected to grow 26.5 percent this year and 8% growth next year. Management expects a 6.5% comp store sales growth in fiscal 2018. This is all the more impressive when you consider that home depot plans to open three new stores this year.
Despite the growth of 26.5%, 6% revenue growth and 6.5% comp store sales growth, we pay only 18.2 times estimates for 2018 sales. It’s a great price! In addition, home depot stock trading at 16.8 times forward estimates.
These forecasts are obviously more long term than just the spring season, but the quarter is the biggest catalyst for business HD. Perhaps it is the fact that banks home depot stock from its recent downturn.
HD stock chart has potential
Speaking of home depots, let’s see what the graphics say. As you can see below, home depot stock has done a good job keeping this $172 to 176 $space over the past six weeks or so. Support about 170 $seems strong and the 200-day moving average is also right up there.
Click to enlarge
There is really one question, but the downtrend line (purple) weight for the price of the stock HD. If support is strong enough, it will push home stock through this resistance level. What have the green light to return $180, and then eventually all the time I hear it next 207.50$.
To return to this level would represent a rally of about 20%, and though it seems now, it’s not as extreme as you might think. Consider that the average price target the price of HD shares is $209. That’s actually above the max!
The bottom line: home depot is approaching to the strongest quarter of the year, pays a 2.4% dividend yield and has some of the best growth rates in retail trade. Assessment is reasonable, and its growth is very durable. We are buyers of stock HD.
Bret Kenwell Manager and author of the forthcoming “blue chips” and on Twitter @BretKenwell. At the time of this writing, Bret Kenwell held a long position in HD.