Home Depot weathered a difficult 2024 marked by rising interest rates and cautious consumers. However, as the year progressed, signs of recovery began to appear, and the building blocks were laid for a recovery in 2025, supported by an increase in housing turnover and pent-up demand in the home improvement market. Year-to-date performance: Up 12% Forward price/earnings ratio (P/E): 25 vs. 5-year average 21.5 Our rating: Buy 1 Our price target: $440 per share HD YTD Mountain Home Depot Year-to-date Achievements to date. Looking back at 2024 Home Depot has had a roller coaster year in 2024, getting off to a slow start in a high interest rate environment before regaining momentum in the second half. Shares were depressed throughout the first half of the year as higher borrowing costs weighed on expensive home improvement projects. Things started to change in March, with expectations of multiple rate cuts by the US Federal Reserve boosting sentiment and pushing stock prices higher. However, these gains were short-lived as investor expectations were reset in May. The real turning point came in mid-September, when the Fed began its monetary easing cycle with a massive 50 basis point rate cut. That sparked optimism about home sales turnover, which hit a 30-year low earlier this year. Home Depot stock rose steadily, reaching an intraday high of nearly $440 on November 26th. Since then, the stock has fallen more than 11% as of Monday trading. During this period, the S&P 500 was relatively flat. Still, Home Depot is one of Jim Cramer’s 12 core holdings. We initiated a position in Home Depot in early September, betting that lower mortgage rates could stimulate activity in the depressed housing sector. Even though the Fed cut rates two more times, delivering a total of 100 basis points (1 percentage point) of easing in 2024, 10-year Treasury yields remain high. Since mortgage interest rates are determined by bond yields, the cost of mortgage loans also remains elevated, and expectations for a recovery in housing development and Home Depot’s subsequent business that would result from it have declined. There is. 25 Year Outlook Home Depot is gearing up for a comeback in 2025, and early signs of recovery are already evident. The company’s third-quarter results, released in mid-November, suggested its business had bottomed out and was poised to turn positive next year. Ultimately, demand for home improvement projects is expected to increase as lower mortgage rates lead to more home buying and selling. The Fed expects two more rate cuts in 2025. Since construction of new homes won’t increase significantly next year, people will have to buy older homes in the U.S. that will need upgrades and repairs. Whether you’re a contract professional or a do-it-yourself shopper, Home Depot remains the go-to place for home improvement supplies. I prefer Home Depot, which competes with Lowe’s, because of its exposure to the professional market. Home Depot has expanded its presence among specialty contractors with its recent acquisition of SRS Distribution, a network of independent roofing and building materials distributors. Interest rates remain the key to Home Depot’s recovery. If mortgage rates fall below 6%, the company’s comparable sales should eventually return to positive territory and reverse the slump in large projects. Since home improvement stocks tend to rise in inverse proportion to falling interest rates, expectations for further easing by the Federal Reserve are likely to support stock prices. Home Depot’s earnings should follow suit. But there is a risk that long-term bond yields, which are more closely tracked by mortgage rates, will continue to rise. This could delay Home Depot’s return to growth. Home Depot may have tariff issues related to its exposure to Mexico, Canada, and China, but with more than half of its portfolio sourced from the U.S., the retailer is less vulnerable. Probably not (Jim Cramer Charitable Trust for the long term) HD. See here for a complete list of stocks. ) As a subscriber to Jim Cramer’s CNBC Investment Club, you will receive trade alerts before Jim makes a trade. After Jim sends a trade alert, he waits 45 minutes before buying or selling stocks in his charitable trust’s portfolio. If Jim talks about a stock on CNBC TV, he will issue a trade alert and then wait 72 hours before executing the trade. The above investment club information is subject to our Terms of Use and Privacy Policy, along with our disclaimer. No fiduciary duties or obligations exist or arise from your receipt of information provided in connection with the Investment Club. No specific results or benefits are guaranteed.
Monday, August 12, 2024 at a Home Depot store in Washington, DC, USA. Home Depot is scheduled to announce its financial results on August 13th.
Ting Sheng | Bloomberg | Getty Images
home depot weathered a difficult 2024 marked by rising interest rates and cautious consumers. However, as the year progressed, signs of recovery began to appear, and the building blocks were laid for a recovery in 2025, supported by an increase in housing turnover and pent-up demand in the home improvement market.
