Home Depot Price Targets Lowered Following Q3 Earnings Miss

Home Depot (HD) faces headwinds as several analysts have lowered their price targets following the company’s Q3 fiscal 2025 earnings report and revised guidance, reflecting concerns about softening demand and a challenging macroeconomic environment.

Home Depot Price Targets Lowered

The market responded negatively to the news, with Home Depot shares declining approximately 5.44% in pre-market trading following the earnings release. Shares traded near their 52-week low, indicating investor apprehension regarding the company’s near-term prospects.

Home Depot reported Q3 revenue of $41.4 billion, a 2.8% increase year-over-year, and comparable sales increased by 0.2% overall (U.S. comparable sales rose by 0.1%). Net earnings were $3.6 billion, or $3.62 per diluted share, slightly down from $3.67 per share in the same period of fiscal 2024. Adjusted Earnings Per Share (EPS) were $3.74, compared to $3.78 in the prior year. Factors such as fewer storm-related activities and ongoing consumer uncertainty impacted home improvement demand, contributing to the earnings miss.

In light of its Q3 performance, Home Depot updated its fiscal 2025 guidance, projecting total sales growth of approximately 3.0% and slightly positive comparable sales growth for the comparable 52-week period. Adjusted diluted EPS is expected to decline approximately 5.0% from $15.24 in fiscal 2024.

Analyst reactions have been largely cautious. RBC Capital analyst Steven Shemesh lowered the firm’s price target on Home Depot to $376 from $401, maintaining a ‘Sector Perform’ rating. Shemesh noted that while exogenous factors like weather and the inclusion of GMS contributed to the results, category demand appears softer than anticipated. RBC is struggling to find near-term catalysts to drive home improvement category demand, especially as consumer data points seem to suggest a deteriorating macro environment.

Goldman Sachs analyst Kate McShane lowered the firm’s price target on Home Depot to $406 from $444, retaining a ‘Buy’ rating. McShane cited the company’s EPS miss and lowered FY25 guidance, attributing it to the consumer environment not improving sequentially and a pressured housing backdrop. However, Goldman Sachs believes Home Depot is poised to accelerate growth when the macro environment improves and is well-positioned to take market share due to ongoing investments and acquisitions.

Adding to the negative sentiment, Stifel downgraded Home Depot from ‘Buy’ to ‘Hold’, lowering the price target from $440 to $370, reflecting increased caution regarding the company’s outlook amid competitive pressures and market conditions. Conversely, DA Davidson maintained a ‘Buy’ rating with a price target of $475, indicating confidence in Home Depot’s long-term prospects.

The broader home improvement sector is facing headwinds, including low housing turnover and reduced housing activity. Lowe’s also revised its annual forecasts downward, citing economic uncertainty and persistent inflation affecting consumer spending on major home-improvement projects.

HD Analyst Summary

Home Depot faces a challenging near-term outlook amidst a softening market and cautious consumer sentiment, but the company’s strategic investments and potential for market share gains could position it for future growth when macroeconomic conditions improve.