RH Gets The Catalyst The Sell-Side Was Looking For

RH RH has been one of the most volatile and polarizing stocks on Wall Street in 2017, and a pair of analysts see the company’s investor day event on Thursday as a major potential catalyst for the stock.

The Analyst

William Blair analyst Daniel Hofkin maintains an Outperform rating for RH stock.

The Thesis

According to Hofkin, investor day will likely provide shareholders with positive updates on the company’s near-term performance and longer-term strategy. Hofkin said stabilizing sales trends and conservative second-half 017 guidance should be a winning combo for the stock.

“While RH shares have posted a huge run this year and have rallied nicely even since the October debt repayment announcement, we sense that Thursday’s analyst/investor day could still prove positive for the stock,” Howkin wrote.

The Analyst

Buckingham Research Group analyst Kelly Crago maintains a Buy rating and has raised the firm’s price target from $88 to $112.

The Thesis

Crago said Buckingham is anticipating up to a 10-cent EPS beat from RH in the third quarter.

“At the analyst day, we will be interested in hearing more about recent structural changes to the business that have the potential to drive GM above prior peak over time,” Crago said.

Crago said the more the business stabilizes, the higher the chance of a debt conversion that could significantly reduce RH’s balance sheet risk. Given the timing of the investor day event, Buckingham expects a Q3 earnings preannouncement, as well as the possibility of a Q4 guidance raise.

Price Action

RH stock fell 6 percent Wednesday. However, after the close, the company raised Q4 net income guidance from $33 million-$37 million to $37 million-$41 million. The company raised Q4 sales outlook from $664 million-$689 million to $655 million-$680 million.

As a result, the stock was up more than 12 percent at $93.97 in after-hours trading.

Related Links:

Barron's Picks And Pans: Walmart, China Mobile, Match And More

Restoration Hardware Restored To A Buy Rating At Deutsche