Wall Street analysts feel good about one of our retail stocks, but worried about another. Home Depot news Telsey Advisory Group, a leader in retail industry analysis, upgraded Home Depot stock to an outperform buy on Friday. The research firm also raised its 12-month price target to $455 per share from $360, implying nearly 14% upside from Thursday’s close. Home Depot is set to report third-quarter results before the opening bell on Tuesday. Mountain HD Year-to-Day YTD HD Yield. While predicting “continued softness” in third-quarter sales, Telsey analysts are predicting strong earnings and revenue growth in 2025 — driven by lower mortgage rates, continued hurricane recovery efforts and stronger comparisons. light versus high demand from the post-pandemic period. These catalysts, combined with Home Depot’s strong business fundamentals, should continue to help the company gain market share in home improvement, Telsey analysts said. They highlighted further growth in the company’s pro business supporting larger and more complex projects. Telsey sees Home Depot outperforming the S&P 500 in 2025. The stock has gained nearly 17% this year — currently underperforming the benchmark index’s more than 25% advance in 2024. Big picture Telsey’s growing confidence in Home Depot comes against the backdrop of economic stability and inflation mitigation. The Federal Reserve’s easing of monetary policy, which included another interest rate cut on Thursday, should lead to cheaper mortgages and a stronger housing market. Home builders rely on Home Depot and so do new homeowners working on remodeling projects. Shares of Home Depot rose more than 2.5% this week on a general market rally driven by the quick resolution of the presidential election. The stock has been mostly up since disappointing earnings and guidance in August. Conclusion Jim Cramer has argued for months that Home Depot will be the main beneficiary of the Fed’s easing. However, stubbornly high bond yields ahead of Thursday’s rate cut pushed that catalyst because mortgages were being held higher. During Friday morning’s conference call, Jim said that Home Depot stock could eventually reach Telsey’s $455 price target given that there is a lot to like about the company right now. The club’s price target stands at $420. To be sure, there is usually a six to nine month lag after the Fed’s first rate cut, which was in September, when the housing market should see improvement. This means that investors should be patient. Jim said he doesn’t want people to sell Home Depot stock when they see next week’s earnings. While admitting they “won’t be brilliant,” he stressed, “it’s the perspective that matters.” On the Best Buy news Citi cut Best Buy’s price target to $109 a share from $115 on Friday, maintaining a buy rating on the stock. BBY YTD mountain Best Buy stock performance year-to-date. Analysts argue that President-elect Donald Trump’s promised tariffs on China are an “imminent overreach” for Best Buy, a retailer with massive exposure to imports from the world’s second-largest economy. It’s not all bad. Citi said the AI-driven technology replacement cycle, which should boost profits and same-store sales as customers turn to Best Buy to upgrade smartphones and computers, “remains intact.” Big picture Under Trump, higher tariffs, particularly against China, are expected to be part of his economic playbook. Any new tariffs on Chinese imports would be a challenge for Best Buy since much of the electronics retailer’s inventory is made in China. Shares of Best Buy are down about 2.5% this week. Ahead of the election, we trimmed our best-buy position — locking in gains as stocks rallied from the Aug. 5 low on rate-cut optimism. The Bottom Line Despite Citi’s concerns, we’re sticking with Best Buy. We still believe the technology replacement cycle is a tailwind for the retailer as consumers look to buy the latest AI-driven devices. Best Buy should be well positioned to benefit from falling interest rates if home sales pick up again. That would drive purchases of the appliances, TVs and big-ticket items that Best Buy sells — just as we believe it would for Home Depot and its home building and improvement products. Best Buy reports quarterly results on November 26. (Jim Cramer’s Charitable Trust is long HD, BBY. See here for a complete list of stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you’ll receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a share in his charitable trust portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after the trade alert is issued before executing the trade. 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A Home Depot store in Washington, DC, US, Monday, Aug. 12, 2024. Home Depot Inc. is scheduled to release earnings figures on August 13.
Ting Shen | Bloomberg | Getty Images
Wall Street analysts feel good about one of our retail stocks, but worried about another.