Home Depot: 19% Down from Peak, But Weak FY25 Guide Still Too Rosy
Company Update (HD US) (Neutral): Shares are within 10% of their 52-week low, but we see a better entry point later.
Highlights
At $355.52, shares at 23.4x guided FY25 EPS (2% down from FY24).
EPS has been flattish since FY23 after 2 years of comp. sales declines.
But neither FY24 results nor FY25 guidance reflects damage from Trump.
Sales and earnings have further to fall in a recession, as they did in GFC.
We reiterate our Neutral rating, but may buy if shares fall by 25% more.
Introduction
We review our Neutral rating on Home Depot after shares have fallen 19% from their 52-week high in December, to just 10% above their 52-week low:
Home Depot Share Price (Last 1 Year)
Source: Google Finance (20-Mar-25).
We downgraded our rating on Home Depot in October, and shares have since lost 13.0% (after dividends). Home Depot was previously a small position both in our “Select 15” model portfolio and in real life, and we exited both with profits.
Home Depot is a high-quality business that we would like to own, but its current valuation is not cheap enough relative to the near-term macro downturn we expect, and current FY25 guidance may prove insufficiently cautious.