Could RH’s Recent 40% Slide Represent a Buying Opportunity?

Key Points

• RH shares have fallen roughly 40% over the past three months and about 70% from early 2025 highs, following a volatile run since peaking above $700 during the pandemic.
• Fourth-quarter results missed expectations, with EPS of $1.53 and revenue of $843 million falling short, while margins were pressured by elevated investment spending and tariffs.
• Despite the weak quarter, RH is guiding for 4% to 8% revenue growth in 2026 with acceleration ahead, and analysts’ average price target of about $176 implies roughly 30% upside from current levels.

RH NYSE: RH, formerly known as Restoration Hardware, has struggled for years and has recently seen another sharp decline, with shares falling nearly 40% over the past three months. However, Wall Street still sees significant upside, leaving investors to weigh whether the current price presents a buying opportunity.

Shares of the luxury retailer peaked above $700 in mid-2021 during the pandemic boom before giving back much of those gains. By mid-2022, the stock had fallen below $230. It remained volatile in the years that followed, rebounding above $450 in early 2025 before sharply reversing course. Since then, shares have fallen roughly 70%. They are currently trading in the high $130's.

Q4 Results Miss EPS and Revenue Expectations

The stock took another hit this year following the company's fourth-quarter earnings report on March 31, which sent shares down more than 19%. Year to date, shares are down roughly 23%.

For the quarter, RH reported earnings of $1.53 per share, below $1.58 per share a year earlier and well short of analyst expectations of $2.21 per share. Revenue of roughly $843 million was up almost 4% year over year but missed expectations by about $31 million. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) margin was 17.7%.

The report was the latest in a string of inconsistent results. Earnings have missed expectations in six of the past eight quarters, while revenue has fallen short in five of those periods.

Discussing the results, Chief Executive Gary Friedman pointed to a difficult backdrop. "We're compounding clutter from tariffs, global discord as a result of war, and the most dire housing market in decades, which can make it difficult to separate the signal from the noise," he said.

Margins Pressured by Investment Spending and Tariffs

Margins were a key focus during the earnings call, though Friedman said the pressure was "somewhat disconnected and unrelated from the demand."

He described 2025 as a "peak investment year" for RH, with $289 million in adjusted capital expenditures tied to its global expansion and an additional $37 million spent to acquire three trade-focused brands ahead of its launch of RH Estates. The company expects the RH Estates brand, which will focus on traditional luxury home furnishings, to be a strong driver of future growth.

Tariffs also significantly impacted margins. Chief Financial Officer Jack Preston said tariffs resulted in a 190-basis-point drag, which was above the company's initial forecast of 90 basis points and its updated estimate of 170 basis points.

RH Issues Conservative 2026 Outlook But Sees Growth Ahead

Despite the difficult quarter, Friedman pointed to some areas of strength in 2025, including year-over-year revenue growth that he said outpaced RH's home furnishings peers. He also highlighted year-over-year improvements in adjusted EBITDA and free cash flow.

RH issued conservative guidance for 2026, citing uncertainty around interest rates and inflation. The company expects revenue growth of 4% to 8% in 2026, with growth accelerating to 10% to 12% in 2027. By 2030, RH expects revenue to range from $5.4 billion to $5.8 billion.

RH expects adjusted EBITDA margins of around 14% to 16% in 2026, rising to 25% to 28% by 2030. The company also anticipates cash flow of $300 million to $400 million in 2026, increasing to $500 million to $600 million in 2027, inclusive of $200 million to $250 million in asset sales each year. RH expects cumulative cash flow of $3 billion by 2030, inclusive of asset sales, and aims to be debt-free by 2029.

Analyst Reaction Mixed as Price Targets Suggest Upside

The Q4 report promoted a wave of negative analyst reactions: eight lowered their price targets, and one downgraded the stock to Strong Sell from Hold. Currently, the consensus rating on the stock is Hold, with eight analysts assigning it a Hold rating, seven a Buy, and five a Sell.

Despite disappointment with the quarter, the average price target suggests the stock could have room to run over the next year. The consensus price target of $176.47 is nearly 28% above the current share price. Only two analysts expect the stock to decline. Goldman Sachs has a target of $88, while BNP Paribas Exane has a target of $98. Other targets range from $140 to $350.

Despite the potential upside, short interest has been trending higher. Almost 40% of the float is now sold short, a sharp increase from prior years, suggesting a meaningful portion of the market is betting against the stock.

Disappointing earnings, margin pressure, and a challenging macro backdrop have driven RH's recent decline. While the company continues to invest in its long-term growth strategy, future performance will likely hinge on how that strategy unfolds, particularly as RH navigates margin pressures and a weak housing market.