The Home Depot Inc. HD has witnessed a significant decline in the past six months, pushing the stock below industry thresholds and raising caution from a technical standpoint. HD’s struggles mainly relate to softened demand and pressure on discretionary, high-ticket categories. This ongoing weakness has weighed on the overall sales and comparable sales performances.
In addition to softer consumer spending, elevated interest rates have posed profitability challenges. Home Depot's management noted that higher borrowing costs, which emerged in early 2024, are likely to persist, influencing consumer purchasing behavior and financial conditions.
As a result, HD continues to see soft engagement for big-ticket discretionary categories, resulting in soft sales. Also, higher interest rates, soft margins and ongoing macroeconomic uncertainties pose risks.
Driven by these trends, Home Depot’s stock trades below its 50 and 200-day simple moving averages (SMAs), indicating a bearish outlook and challenges in sustaining the recent performance levels. The stock recently moved below the 200-day SMA on March 6, 2025.
The SMA is an essential tool in technical analysis that helps investors evaluate price trends by smoothing short-term fluctuations. This approach provides a clearer perspective on a stock's long-term direction. This technical indicator, along with higher interest rates, soft margins and ongoing macroeconomic uncertainties, reflect doubts about HD’s financial health and prospects.
Home Depot Stock Trades Below 50 & 200-Day SMAs
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Shares of the leading home improvement retailer have lost 11.2% in the past six months, slightly outpacing the industry’s collective decline of 12.4%. However, the HD stock compared unfavorably with the broader Retail-Wholesale sector’s growth of 2.2% and the S&P 500 Index’s dip of 1.4% in the same period.
Home Depot’s performance is notably stronger than that of its closest competitor, Lowe’s Companies Inc. LOW, which has declined 13.4% in the past six months. However, HD has underperformed peers like Williams-Sonoma, Inc. WSM and FGI Industries Ltd. FGI, which rose 4.4% and 0.8%, respectively, in the same period.
HD’s Six-Month Stock Performance
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At the current share price of $365.52, Home Depot reflects a 12.9% premium to its 52-week low mark of $323.77. Meanwhile, the stock price reflects a 16.8% discount from its 52-week high of $439.37.
Home Depot’s Premium Valuation Surpasses Peers
Despite the stock’s decline, HD’s current forward 12-month price-to-earnings (P/E) multiple of 23.99X reflects a premium to the Zacks Retail – Home Furnishing industry average of 21.27X.
At 23.99X forward 12-month P/E, Home Depot’s valuation is much higher than its competitors, such as Lowe’s Companies, Williams-Sonoma and FGI Industries, which are delivering solid growth and trade at more reasonable multiples. This raises concerns about whether HD is a justified buy at current levels. A high P/E ratio, with its low Value Score of D, adds to investor unease.
Lowe’s Companies, Williams-Sonoma and FGI Industries have forward 12-month P/E ratios of 18.75X, 18.55X and 10.8X — all lower than that of Home Depot.
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HD’s Estimates Reflect Downtrend
Led by the cautious outlook, Home Depot’s estimates have shown a declining trend in the past 30 days. The Zacks Consensus Estimate for HD’s fiscal 2025 and 2026 earnings per share edged down 0.3% and 0.1%, respectively, in the last 30 days. The downward revision in earnings estimates indicates that analysts are less confident about the company’s growth potential.
For fiscal 2025, the Zacks Consensus Estimate for HD’s sales implies 2.7% year-over-year growth, whereas the EPS estimate indicates a 1.7% year-over-year decline. The consensus mark for fiscal 2026 sales and earnings suggests 4.3% and 10.2% year-over-year growth, respectively.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
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Do Home Depot’s Strategies Promise Growth?
Home Depot remains confident in its strategic initiatives to drive sustained business growth. The company continues to enhance its seamless, interconnected customer experience, strengthen the Pro wallet within its robust ecosystem and expand its store footprint. With a positive outlook on the home improvement industry, HD is well-positioned to capture greater market share.
The "One Home Depot" strategy, backed by a strong technology infrastructure, has consistently fueled online engagement. Investments in the Pro ecosystem solidify its competitive edge.
Home Depot's interconnected retail strategy remains a key growth driver, ensuring a frictionless shopping experience across digital and physical channels. In fourth-quarter fiscal 2024, online sales (excluding the extra week) rose 9%, driven by higher engagement in faster delivery services.
Committed to omnichannel excellence, HD continues to refine its supply chain. Enhancements in Distribution Fulfillment Centers (DFCs) have expanded product availability and accelerated delivery speeds. Leveraging its store network, the company offers its fastest delivery times ever, boosting customer spending.
With optimized inventory management, strong employee engagement, and expanding e-commerce and home delivery services, Home Depot is poised for continued market share growth. The acquisition of SRS Distribution cements its leadership in building materials, enhancing offerings for professional contractors and tradespeople.
Looking into fiscal 2025, Home Depot expects business momentum from late 2024 to carry forward, supported by Pro sales growth, store expansions and contributions from SRS. With a resilient customer base, a strong market position and ongoing strategic investments, HD is well-equipped to drive market share gains and sustain long-term profitability.
Investment Choice for HD Stock
While Home Depot’s earnings guidance may fall short of expectations, its growth initiatives, particularly the "One Home Depot" strategy and strong Pro customer sales, reinforce its long-term potential. Despite a premium valuation and a cautious outlook, the recent stock pullback presents an attractive entry point for investors seeking exposure to the retailer’s promising growth trajectory.
However, market headwinds warrant a careful assessment of recent developments before making investment decisions. For existing shareholders, retaining this Zacks Rank #3 (Hold) stock could prove beneficial over the long term. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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