Home Depot (NYSE:HD) received an upgrade from Stifel, which raised its rating from Hold to Buy after the home improvement giant released its Q1 fiscal 2025 earnings.
The upgrade came on the heels of stronger-than-expected sales momentum, which boosted the firm’s confidence in Home Depot’s longer-term growth prospects. Stifel expressed surprise at the stock’s lackluster performance during Tuesday’s session, noting a 0.6% dip in HD shares, compared to a 0.4% slide in the S&P 500.
One of the primary drivers of the upgrade was the company’s accelerating comparable sales, which Stifel identified as the most significant takeaway from the earnings release. The firm specifically highlighted April’s U.S. comparable sales, which increased by nearly 2.5% when adjusted for Easter. According to Stifel, “accelerating comparable sales through F1Q25 [was] the key positive takeaway.”
Reflecting its improved outlook, Stifel raised its price target on Home Depot stock from $405 to $425, stating that the company is well-situated to benefit from an eventual upswing in home renovation and repair spending. “We view a fulsome home improvement category inflection as a ‘when not if,’” the analysts noted.
While Home Depot kept its full-year guidance unchanged, Stifel believes the recent momentum suggests the potential for better-than-expected results. “We believe this performance demonstrates HD’s idiosyncratic advantages, suggesting upside potential to reiterated FY25 guidance,” they said. More importantly, the current trajectory is “driving our increased conviction in the revenue acceleration underpinning our FY26E-FY27E.”
Stifel added that with recent performance trends, the risk around timing appears to have diminished, helping to improve the stock’s narrative. Home Depot’s position is now “largely derisked from the timing,” according to the firm, which allows investors to “shift the narrative away from trepidation around ongoing negative revisions.”
In conclusion, Stifel sees Home Depot as well-equipped to outperform peers as the home improvement sector gains traction. “We believe the FY25 performance will drive enthusiasm for HD’s ability to disproportionately capitalize on a likely above trend-line home improvement category recovery.”