Home Depot (HD) Stock Forecast & Price Target

Home Depot has demonstrated a consistent ability to generate higher sales and earnings growth than its primary competitor, Lowe’s, which supports a premium market valuation. Positive trends in the housing market, with home prices steadily increasing for 19 consecutive months and projections of a slight improvement in the home improvement retail industry in 2025, contribute to a favorable outlook for the company. Additionally, a resurgence in comparable sales transactions, boosted by hurricane-related activity and a successful holiday season, reflects an improving underlying trajectory across multiple product categories.

Home Depot's outlook is negatively impacted by declining EBIT margins, projected at 13.4%, which reflects a reduction of approximately 40 basis points from previous expectations due to factors such as sales deleverage and a negative mix shift from recent acquisitions. Gross margins have also contracted to 32.8%, down 25 basis points year-over-year, amid collapsing lumber prices and a decline in housing affordability that has led to reduced homebuilding demand. Furthermore, adjusted diluted EPS is expected to fall by around 2%, along with increasing burdens from a higher-than-anticipated tax rate, signaling potential challenges in maintaining profitability in an uncertain economic environment.