The Home Depot Inc. HD continues to trend up the charts, backed by steady growth, fueled by its leadership position in the home improvement market, and ongoing investments in technology, digital capabilities and supply-chain efficiency through its "One Home Depot" plan. HD’s stock rally also reflects its focus on customer service. Do-it-Yourself support and professional (Pro) contractor services make it a go-to destination for homeowners and industry professionals.

Driven by these trends, the HD stock is trading above its 200-day simple moving average (SMA) yesterday, indicating the possibility of further growth. This technical strength reflects positive market perception, and confidence in Home Depot’s financial health and prospects.

The SMA is an essential tool in technical analysis that helps investors evaluate price trends by smoothing short-term fluctuations. This approach provides a clearer perspective on a stock's long-term direction. This technical strength, coupled with the HD stock's sustained momentum, indicates positive market sentiment, and reflects investor confidence in its financial health and growth potential.

Home Depot Stock Trades Above 200-Day Moving Average

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HD shares have steadily grown in the past six months, driven by resilient business trends. In the past six months, the company’s shares have risen 8.7% compared with the broader industry’s 8.8% growth and the Zacks Retail-Wholesale sector’s 12.4% growth.

Home Depot’s performance is notably stronger than that of its close competitor Lowe’s Companies Inc. LOW, which rose 6.7%. Additionally, the company has surpassed FGI Industries FGI and Haverty Furniture Companies’ HVT declines of 23.7% and 15%, respectively, in the past six months.

The stock’s current price of $389.89 reflects an 11.3% discount from its 52-week high of $439.37, indicating room for growth. The HD stock trades at a 20.4% premium to its 52-week low mark of $323.77.

HD Stock’s 6-Month Price Performance

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What’s Behind HD Stock’s Momentum?

Home Depot is focused on reinforcing its position as the leading home improvement retailer through a multi-pronged growth strategy. The company has been actively investing in creating a seamless, interconnected customer experience, enhancing its Pro offerings through a robust ecosystem and expanding its store footprint. Progress on the "One Home Depot" investment plan remains strong, with a focus on expanding supply-chain facilities, advancing technology and improving the digital experience.

The company has invested in seamless omnichannel capabilities, integrating its in-store and digital platforms to provide a cohesive shopping experience. Enhanced delivery options, such as same-day and next-day delivery, catering to evolving customer expectations. The interconnected retail strategy, supported by a solid technology infrastructure, has driven consistent growth in web traffic over recent quarters.

Improved search capabilities, an upgraded Pro site and strong fulfillment operations have boosted online conversions, with sales through digital platforms increasing 4% year over year in the third quarter of fiscal 2024. This strategy resonates with customers, as nearly 50% of online orders were fulfilled through stores during the same period.

Home Depot is prioritizing its professional contractor customer base by expanding specialized services, credit options and dedicated support to meet their unique needs.

HD is making significant investments to modernize and optimize the supply-chain network, including the establishment of direct fulfillment centers, and market delivery operations for faster and more efficient product delivery. The company continuously updates its product offerings to align with consumer trends, such as sustainable products and smart home technology.

Through advanced analytics and technology adoption, Home Depot drives operational efficiencies to reduce costs and improve margins while reinvesting in growth opportunities. These strategies are underpinned by a commitment to sustainability, workforce development and community support, positioning the company for long-term success in a competitive market.

HD’s Upward Estimate Trajectory

Driven by the upbeat outlook, the company’s estimates have shown an uptrend in the past 60 days. The Zacks Consensus Estimate for HD’s fiscal 2024 and 2025 earnings per share rose 0.7% and 0.4%, respectively, in the last 60 days. The upward revisions in earnings estimates indicate that analysts have continued faith in the company’s growth potential.

For fiscal 2024, the Zacks Consensus Estimate for HD’s sales and earnings implies 3.9% and 0.1% year-over-year growth, respectively. The consensus mark for fiscal 2025 sales and earnings indicates 3.4% and 3.5% year-over-year growth, respectively.

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HD’s Premium Valuation

With the stock steadily ticking up, the company is currently trading at a forward 12-month P/E multiple of 24.95X, exceeding the industry average of 22.76X and the S&P 500’s average of 21.78X. At current levels, Home Depot’s stock valuation looks expensive.
 
The premium valuation indicates that investors have high expectations for Home Depot’s future performance and growth potential. Investors may be skeptical about buying the stock at these premium levels and may wait for a better entry point.

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Troubles Faced by Home Depot

HD faces several challenges that could impact its growth and operational efficiency. The widespread headwinds across its business due to higher interest rates and increased macroeconomic uncertainty led to reduced consumer demand for home improvement projects. This has been particularly evident in big-ticket discretionary categories.

The trend, which began in the first quarter of fiscal 2024, has continued to impact the company’s performance over recent quarters. In the third quarter of fiscal 2024, big-ticket comparable transactions (those more than $1,000) fell 6.8% year over year due to weaker demand for larger discretionary projects like kitchen and bath remodels, often financed through credit.

A drop in comparable customer transactions, driven by weaker sales in big-ticket discretionary categories, continues to weigh on overall comps. In the fiscal third quarter, comps decreased 1.3% year over year, reflecting a 0.6% decline in comparable transactions and a 0.8% dip in the average ticket size. In the U.S. market, comps fell 1.2% in the same period.

Is it Wise to Buy HD Stock Now?

While Home Depot’s initiatives have positioned it well for long-term growth, it must address these challenges to maintain its competitive edge. By focusing on operational efficiency, customer-centric innovation and sustainable practices, Home Depot can navigate these headwinds and continue to lead in the dynamic home improvement retail landscape.

While Home Depot’s strengths, an upbeat fiscal 2024 outlook and positive estimate revisions inspire investor optimism, caution is advised. The stock's premium valuation and prevailing headwinds call for a thorough evaluation of recent developments before making investment decisions. For current shareholders, retaining this Zacks Rank #3 (Hold) stock in their portfolios may prove advantageous in the long term. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Lowe's Companies, Inc. (LOW) : Free Stock Analysis Report

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