S&P 500   5,137.08
DOW   39,087.38
QQQ   445.61
Lawyers who successfully argued Musk pay package was illegal seek $5.6 billion in Tesla stock
This is the #1 Stock to Buy for the AI Tidal Wave (Ad)
Sports analytics may be outnumbered when it comes to artificial intelligence
Chicago 'mansion' tax to fund homeless services stuck in legal limbo while on the ballot
Critical asset just had biggest fall on record (Ad)
Norway's hospitalized king gets a pacemaker in Malaysia after falling ill during vacation
Head Start preschools aim to fight poverty, but their teachers struggle to make ends meet
Critical asset just had biggest fall on record (Ad)
South Korean doctors hold massive anti-government rally over medical school recruitment plan
What to watch for as China's major political meeting of the year gets underway
S&P 500   5,137.08
DOW   39,087.38
QQQ   445.61
Lawyers who successfully argued Musk pay package was illegal seek $5.6 billion in Tesla stock
This is the #1 Stock to Buy for the AI Tidal Wave (Ad)
Sports analytics may be outnumbered when it comes to artificial intelligence
Chicago 'mansion' tax to fund homeless services stuck in legal limbo while on the ballot
Critical asset just had biggest fall on record (Ad)
Norway's hospitalized king gets a pacemaker in Malaysia after falling ill during vacation
Head Start preschools aim to fight poverty, but their teachers struggle to make ends meet
Critical asset just had biggest fall on record (Ad)
South Korean doctors hold massive anti-government rally over medical school recruitment plan
What to watch for as China's major political meeting of the year gets underway
S&P 500   5,137.08
DOW   39,087.38
QQQ   445.61
Lawyers who successfully argued Musk pay package was illegal seek $5.6 billion in Tesla stock
This is the #1 Stock to Buy for the AI Tidal Wave (Ad)
Sports analytics may be outnumbered when it comes to artificial intelligence
Chicago 'mansion' tax to fund homeless services stuck in legal limbo while on the ballot
Critical asset just had biggest fall on record (Ad)
Norway's hospitalized king gets a pacemaker in Malaysia after falling ill during vacation
Head Start preschools aim to fight poverty, but their teachers struggle to make ends meet
Critical asset just had biggest fall on record (Ad)
South Korean doctors hold massive anti-government rally over medical school recruitment plan
What to watch for as China's major political meeting of the year gets underway
S&P 500   5,137.08
DOW   39,087.38
QQQ   445.61
Lawyers who successfully argued Musk pay package was illegal seek $5.6 billion in Tesla stock
This is the #1 Stock to Buy for the AI Tidal Wave (Ad)
Sports analytics may be outnumbered when it comes to artificial intelligence
Chicago 'mansion' tax to fund homeless services stuck in legal limbo while on the ballot
Critical asset just had biggest fall on record (Ad)
Norway's hospitalized king gets a pacemaker in Malaysia after falling ill during vacation
Head Start preschools aim to fight poverty, but their teachers struggle to make ends meet
Critical asset just had biggest fall on record (Ad)
South Korean doctors hold massive anti-government rally over medical school recruitment plan
What to watch for as China's major political meeting of the year gets underway

Is The Bottom In For RH, Or Is This Just A Stopping Point? 

RH stock price

Key Points

  • RH had a rough quarter and gave weak guidance, but a bottom is in play. 
  • Tough times are ahead, but efforts to improve operations will drive leverage when consumer spending increases. 
  • The analysts lower their targets but still see an upside for the stock. 
  • 5 stocks we like better than RH

Signs within the RH NYSE: RH report indicate that a bottom could be in play for the stock. While results are worse than the Marketbeat.com consensus figures and the guidance is poor, there is an expectation for margin improvement throughout the year. The company is doubling-down on restructuring efforts, has cut 440 jobs, and has begun a mission to reduce inventory and ferret out other cost-saving measures. These efforts may not result in a sustainable rally until the economic conditions improve, but they will set the business up for leverage when it does. At that time, this stock could see revenue growth with accelerated earnings growth that drives it back to the pandemic highs. 

“It’s clear that the stay-at-home restrictions of the pandemic created an exponential lift for home-related businesses, and it’s also clear the lift, like the pandemic, was a temporal isolated event versus something structural or systemic… Additionally, inflation that was thought to be “transitory” is now deemed “persistent” by the Federal Reserve, resulting in a record rise in interest rates triggering a dramatic decline of the housing market … Add to that an underperforming stock market, and a banking crisis no one saw coming and the data points to business in our sector likely getting worse before it gets better,” said RH in a letter to shareholders. 

RH Steadies On Weak Results, Outlook 

RH did not have a great quarter, with revenue declines and rising costs driving significant deleveraging on the bottom line. The takeaway from the market action is that analysts were expecting worse and seeing the glimmers of light at the end of the tunnel. The worst news is the margin contracted at the gross and operating levels, with the adjusted operating margin down 860 basis points compared to last year. This drove weaker-than-expected earnings with adjusted EPS of $2.88, down 50% YOY and almost $0.50 less than the analysts expected. 

The guidance is also weak but comes with an expectation for margin expansion in the back half of the year. The Q1 guidance assumes $735 million in revenue at the high end compared to the consensus of $780 with an operating margin of 13% to 14%. The operating margin is expected to increase by at least 300 basis points by the end of the year. Revenue may also exceed expectations due to the company’s planned expansions into interracial markets such as the Med, where wealthy people go on vacation. 

Analysts Lower Their Targets For RH, Still See Upside 

The analysts have lowered their targets following RH’s Q4 release, but the sentiment holds firm at Hold. The Hold rating is down from last year’s Moderate Buy, and the price target is moving lower, but most still see at least some upside for the stock. Assuming this holds, the stock should continue to bottom at this level, but there is a risk of additional downgrades. The 7 most recent reports have the stock trading slightly below the consensus, and the group low is below the current price action. 

The chart shows support at the $225 level. The chart also shows the market is oversold and listless after a year of short-selling and profit-taking. The short interest is near 15% and could cap gains if the bears keep selling. The stock appears to be rangebound, with sell-siders buying at the bottom of the range and bears selling at the top. This situation may not end until later in the year when results and guidance confirm the bottom or point to lingering weakness. 

→ Critical asset just had biggest fall on record (From Stansberry Research) (Ad)

Should you invest $1,000 in RH right now?

Before you consider RH, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and RH wasn't on the list.

While RH currently has a "Hold" rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

Metaverse Stocks And Why You Can't Ignore Them Cover

Thinking about investing in Meta, Roblox, or Unity? Click the link to learn what streetwise investors need to know about the metaverse and public markets before making an investment.

Get This Free Report

Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
RH (RH)
4.4995 of 5 stars
$277.63+1.2%N/A30.14Hold$313.00
Compare These Stocks  Add These Stocks to My Watchlist 

Thomas Hughes

About Thomas Hughes

  • tmhughes.writeon@gmail.com

Contributing Author

Technical and Fundamental Analysis

Experience

Thomas Hughes has been a contributing writer for MarketBeat since 2019.

Areas of Expertise

Technical analysis, the S&P 500; retail, consumer, consumer staples, dividends, high-yield, small caps, technology, economic data, oil, cryptocurrencies

Education

Associate of Arts in Culinary Technology

Past Experience

Market watcher, trader and investor for numerous websites. Founded Passive Market Intelligence LLC to provide market research insights. 


Featured Articles and Offers

Search Headlines: