Home Depot Analysts See a Path to $375 and Beyond

Key Points

• Home Depot posted a stronger-than-expected Q2, with revenue up 5.7% to $47.9 billion and adjusted EPS of $4.92 beating estimates.
• Analysts from Wells Fargo, RBC, and Jefferies remain bullish, maintaining a Moderate Buy consensus with a price target near $375.
• Institutional investors, who hold 70% of the float, have been accumulating shares at their strongest pace in about three years.

Home Depot’s NYSE: HD stock price signaled a trend-following entry earlier this year, having completed a head-and-shoulders reversal at a critical uptrend line.

Momentum was recently boosted by a solid Q2 report, which revealed inherent strengths despite the tepid housing market, with professional and small projects contributing to growth and margin. The impact of IEEPA tariff refunds was in the mix, but viewed as a positive, given unexpectedly higher input costs.

Home Depot’s capital return, centered on dividends, remains safe and reliable. The outlook for sustainability and distribution increases is improving, and that’s what keeps buy-and-hold investors who own so much of HD stock in the mix. HD’s buy-and-hold quality is reflected in its institutional holdings, which account for 70% of the float, and its retail holdings, which account for virtually all of the remaining shares.

Institutions, the larger of the two groups, provide a solid support base, with their activity aligning with the technical Buy signal. MarketBeat data reveals them accumulating at a robust 4.5-to-1 pace over the trailing 12 months, with activity ramping in early Q3 ahead of the Q2 release. The Q3 ramp is particularly telling, as it is the strongest buying signal the group has given in approximately three years.

Home Depot's Q2 Tops Estimates on Stronger-Than-Expected Demand

Home Depot had a decent quarter, with revenue growing by 5.7% to $47.9 billion, about $660 million better than expected. The 140 basis points of outperformance came from solid comps, up 1.7%, with a transaction decline offset by a higher ticket average. Within the mix, small projects were a surprising strength, helping to offset price increases and keep margins healthy.

Margin was a strength, though mixed factors are at play. On the one hand, costs are rising, leading to margin contraction and slower earnings growth. On the other hand, operational performance, unexpected consumer strength, leverage from new stores, and the impact of tariff refunds largely offset the cost increase.

Net income of $4.8 billion was up approximately 5% year-over-year, as was the adjusted $4.92 in earnings per share (EPS), and both came in better than forecasted. Adjusted EPS outperformed MarketBeat’s consensus by approximately 400 basis points, suggesting the guidance is cautious.

The company reaffirmed guidance, calling for about 3.5% revenue growth, 1% comp store growth, about 2% EPS growth, and 15 new stores. EPS growth is underpinned by tariff refunds, which are expected to continue offsetting cost increases, but fundamental strengths are also present. The growing store count and comp-store strength suggest outperformance is possible.

Home Depot Analysts See a Path to $375 and Beyond

The analysts' response to the release included caution, specifically focused on margin compression and cost increases, but was otherwise very bullish.

Analysts from Wells Fargo, Royal Bank of Canada, and Jefferies cited margin outperformance, comp-store strength, and surprising strength in small projects in their commentaries. They highlighted the importance of tariff refunds amid rising costs, but see an improved setup and a higher stock price by year’s end. The implication is clear: renewed confidence in the 12-month forecast, which pegs the stock as a Moderate Buy with a price target near $375.

That consensus price target doesn't represent a robust upside, but rather is a stepping stone to higher prices down the road. A move to $375 would put this market in the high end of its trading range and on track for a breakout. The question is when it will come, and it may not be until well into 2027. By then, the market should have a clearer view.

High Rates Keep Home Depot's Recovery on Hold

The next major catalyst for Home Depot is the unsticking of housing markets, which is not expected until later in 2027, if at all in 2027. The primary hurdle is interest rates, which are unlikely to fall substantially in the foreseeable future. The more likely scenario is that rates remain high through year’s end and well into next year, given high prices and their impact on inflation.

Until then, small projects and maintenance will continue to drive Home Depot’s business and dividend payments. Worth an annualized 2.7% while near the critical support level, HD’s dividend payment is about 65% of its earnings, has been increased for more than 15 consecutive years, and runs a high-single-digit compound annual growth rate.

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