RH Shares Leap On Heels Of Q2 Revenue Report, But Analysts Say Management Is 'Too Optimistic'

Shares of RH RH climbed 23.6% at last check Friday, after the company reported upbeat second-quarter results.

The company, also known as Restoration Hardware, reported its results amid an exciting earnings season. Here are some key analyst takeaways.

• Bank of America analyst Curtis Nagle reiterated a Buy rating, while lifting the price target from $310 to $359.
• Wedbush analyst Seth Basham maintained a Neutral rating, while raising the price target from $250 to $310.
• Telsey Advisory Group analyst Cristina Fernández reaffirmed a Market Perform rating and price target of $290.
• KeyBanc Capital Markets analyst Bradley Thomas maintained a Sector Weight rating on the stock.

Check out other analyst stock ratings.

BofA Securities: RH reported second-quarter sales of $830 million, representing 3.6% year-on-year growth and coming in higher than Street expectations of $824 million, Nagle said. GAAP earnings of $1.45 per share missed consensus of $1.56 per share.

Demand growth accelerated throughout the quarter, indicating “significant” market share gains in North America, the analyst stated. Management lowered the full-year guidance for demand growth from 12%-14% to 8%-10% and revenue growth from 8%-10% to 5%-7%, as the inflection in demand came later than expected, he further stated.

Wedbush: RH's second-quarter results missed demand growth guidance by 200 basis points (bps) but the overall results were broadly in-line with expectations, Basham said. Although the company lowered its 2024 guidance, this was "less than feared," he added.

"RH is confident its new products with an improved price/value equation are resonating with consumers and remains bullish on its forward demand potential," the analyst wrote. He added, however, that the guidance implies a steep ramp in the back half of the year, "with limited visibility and execution risk on an unprecedented number of new products."

Telsey Advisory Group: RH reported earnings of $1.69 per share, beating consensus of $1.56 per share, Fernández said. "After most home-related companies missed revenue expectations during 2Q24, it was positive to see RH meet its 2Q24 outlook and call out that demand (i.e. order intake) was up 7%," she wrote.

Although demand was below RH’s internal target of 9%-10%, it outperformed peers in the second quarter, the analyst stated. "In addition, RH’s demand continued to build in August up 12% pointing to a positive reception to RH’s product introductions," she further wrote.

KeyBanc Capital Markets: While RH delivered an earnings beat, the second quarter figure benefitted from a lower tax rate, Thomas said. He added, however, that the company's second-quarter results reflect "improved demand, despite a challenging macro backdrop."

The consensus and management guidance for 2024 "have proven too optimistic, with RH taking down full-year demand, sales, and margin guidance," the analyst started. "We continue to see NT demand risks for the furniture industry, which could weigh on RH shares," he further wrote.

RH Price Action: Shares of RH had risen by more than 23% to $316.75 at the time of publication on Friday.

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