Wall Street Weighs In On Home Depot's Blowout Q2, BofA Upgrades Stock

Home Depot Inc HD was one of several major retailers to report blowout second-quarter earnings this week, sending the home improvement stock soaring.

Home Depot posted second-quarter EPS of $4.02 on $38.05 billion in revenue Tuesday. Both numbers topped consensus analyst estimates of $3.71 and $34.53 billion, respectively. Revenue was 23.4% higher year-over-year.

U.S. same-store sales rose 25%, and Home Depot's average purchase amount was up 10.1%. It was the first quarter of double-digit same-store sales growth for Home Depot in more than seven years.

Several analysts weighed in on the stock following the impressive print. 

Long-Term Tailwinds For Home Depot: BofA Securities analyst Elizabeth Suzuki said it’s not too late to buy Home Depot shares to capitalize on the shelter-in-place environment.

"Although home improvement spending in the coming quarter may decelerate amidst sequentially declining government stimulus/unemployment benefits, we believe that the longer-term tailwinds for the home improvement industry are generally favorable," the analyst said in a Wednesday upgrade note. 

Morgan Stanley analyst Simeon Gutman said Home Depot is a best-in-class home improvement investment, adding that the housing market has structural, long-term tailwinds.

“In Q3, we assume comps moderate from mid-20s in the first two weeks of August to 20% in the last two weeks of August, followed by 13% in September and 7% in October,” the analyst said. 

Home Depot's Market Share Opportunity: Raymond James analyst Matthew McClintock said investors shouldn’t be turned off by Home Depot’s size given that the company still has meaningful market share opportunities.

“Bigger picture, we see Home Depot as the best-in-class retailer in an effective duopoly, one which should benefit from macro tailwinds for at least the balance of this year,” the analyst said. 

KeyBanc Capital Markets analyst Bradley Thomas said trends in “nesting” industries remain strong.

“We believe HD’s results bode favorably for the industry's 6-12 month outlook and align with our Nesting thesis that home spending will continue to take share of wallet from areas such as travel and entertainment,” the analyst said. 

Home Depot Ratings, Price Targets: BofA Securities upgraded Home Depot from Neutral to Buy and raised the price objective from $290 to $330. 

Morgan Stanley has an Overweight rating and increased the price target from $285 to $295. 

Raymond James has an Outperform rating and increased the price target from $295 to $305. 

KeyBanc has a Sector Weight rating.

HD Price Action: Home Depot shares were trading down 0.72% at $282.95 at the time of publication Wednesday. 

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Photo courtesy of Home Depot.