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MarketScreener Homepage  >  Equities  >  Nyse  >  The Home Depot, Inc.    HD


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Home-Improvement Stocks Stay the Course Amid Nesting During Covid-19 -- Update

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08/21/2020 | 06:44pm EDT

By Julia Carpenter

Home-improvement stocks have been on the rise. As the pandemic keeps many Americans in their houses and apartments -- using their living spaces as home offices, gyms and art studios -- more are interested in upgrading their spaces.

Another strong round of earnings from Home Depot Inc. and other home stocks is indicative of the trend. As of Friday, shares of Home Depot are up 29.7% since the start of the year, and shares of Lowe's Cos. are up 35% in the same period. The S&P 500 is up 5.1% in the same period.

"I've been in this space for 17 years, and this environment is not one I've seen before," said Seth Basham, specialty retail analyst at Wedbush Securities. "I think we'll see this trend persist into 2021, the longer Covid persists as a problem. The stock will just continue to skyrocket."

While these stocks aren't getting upgraded, many have already bet on home-improvement stocks and are watching the trend with interest.

According to Joseph Feldman, senior managing director and assistant director of research at the Telsey Advisory Group, many investors have seen this trend coming. "I have heard a lot of people asking, 'Is this as good as it gets?' " he said. "I am not so sure. I think there is more life for both the sales growth and these stocks."

Home Depot's revenue rose 23% from the year-earlier period to $38.05 billion. Following layoffs of thousands of store workers and cost-cutting this month, Lowe's reported a 30% increase in revenue for the May-to-July quarter.

These companies remain pandemic winners because their stores are deemed "essential" by many municipal governments, which allow them to remain open during coronavirus-prompted shutdowns. Both companies have reported an increase in foot traffic since April, and analysts expect this to continue into the fall months.

"As it relates to growth in the back half of the year, we're still expecting strong growth relative to pre-pandemic levels, but we do expect a bit of moderation compared to this 'peak trend' level, so to speak, that we've seen in recent months," Mr. Basham said.

"These trends have legs, and as I mentioned before, the longer we see people nesting, the more ingrained the shopping behavior is and the willingness and desire to improve and upgrade the home is, even as we move into 2021," he added.

Home-improvement and furnishing companies with strong online presences are especially well-positioned right now when people are hesitant to enter public spaces.

Wayfair Inc. and Overstock.com have seen growth in sales since the start of the year. Shares of Wayfair have more than tripled, up nearly 277% since the end of 2019.

The biggest driver to home-improvement stock success was homeowners looking for projects they can do themselves. Mr. Basham pointed out Home Depot and Lowe's have in this time acquired lots of new customers who now have greater confidence in their ability to take on home renovation, remodeling and smaller improvements. Analysts expect this to continue, as people remain mindful of social distancing and health guidelines that limit interactions with strangers and groups.

Mr. Basham said he has historically looked at home sales and housing prices when it comes to home stocks. But now, he points to the massive shift in consumer-spending trends. The continued success of these home stocks reflects a broader trend in pandemic-era consumer spending, as people cut spending in some areas, such as travel and dining, to reallocate those dollars to groceries and home upgrades.

Investors are betting companies will continue to allow their employees to work from home for the remainder of 2020. Some may see home upgrades as an investment in their home value, said Scot Ciccarelli, retail analyst at RBC Capital Markets.

" 'The home is your castle again' is something I've been saying a lot," Mr. Ciccarelli said. "You see a contractor in front of your neighbor's house, and then in lockdown, you see all the warts in your home. You know, there's only so much Netflix you can watch."

Write to Julia Carpenter at Julia.Carpenter@wsj.com


Stocks mentioned in the article
ChangeLast1st jan.
DJ INDUSTRIAL -2.29% 27685.38 Delayed Quote.-2.99%
LOWE'S COMPANIES, INC. -2.33% 168.13 Delayed Quote.40.39%
NASDAQ 100 -1.61% 11504.518824 Delayed Quote.33.89%
NASDAQ COMP. -1.64% 11358.936824 Delayed Quote.28.71%
S&P 500 -1.86% 3400.97 Delayed Quote.5.27%
THE HOME DEPOT, INC. -2.46% 276.04 Delayed Quote.26.40%
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Financials (USD)
Sales 2021 125 B - -
Net income 2021 12 290 M - -
Net Debt 2021 26 742 M - -
P/E ratio 2021 24,2x
Yield 2021 2,17%
Capitalization 297 B 297 B -
EV / Sales 2021 2,58x
EV / Sales 2022 2,60x
Nbr of Employees 415 700
Free-Float 60,1%
Duration : Period :
The Home Depot, Inc. Technical Analysis Chart | MarketScreener
Full-screen chart
Technical analysis trends THE HOME DEPOT, INC.
Short TermMid-TermLong Term
Income Statement Evolution
Mean consensus OUTPERFORM
Number of Analysts 34
Average target price 305,01 $
Last Close Price 276,04 $
Spread / Highest target 26,8%
Spread / Average Target 10,5%
Spread / Lowest Target -27,5%
EPS Revisions
Craig A. Menear Chairman & Chief Executive Officer
Edward P. Decker President & Chief Operating Officer
Richard V. McPhail Chief Financial Officer & Executive Vice President
Matthew A. Carey Chief Information Officer & Executive VP
Paul Antony Senior Vice President-Technology
Sector and Competitors
1st jan.Capitalization (M$)
THE HOME DEPOT, INC.26.40%304 637
LOWE'S COMPANIES, INC.40.39%130 092