Home Depot stock forecast after smashing Q3 expectations

On Tuesday, Home Depot Inc. (NYSE:HD) shares rallied more than 6% after announcing its most recent quarterly results. The company reported its fiscal third-quarter revenue and earnings before markets opened, beating the consensus for analyst expectations. 

Home Depot posted FQ3 GAAP earnings per share of $3.92, beating the consensus for analyst estimates of $3.37. On the other hand, revenue for the quarter grew by about 9.8% from the same quarter a year ago to $36.82 billion, surpassing the average for Street expectations by $2 billion.

Home Depot are now up nearly 50% this year, thus outperforming the S&P 500 Index’s gain of about 27.37%. Therefore, it may not be a bad time to take some profits.

Should you bet on HD’s growth prospects?

From an investment perspective, Home Depot shares trade at reasonable trailing 12-month and forward P/E ratios of 27.68 and 25.83, respectively. Therefore, it could be a compelling option for value investors.

On the other hand, analysts expect its earnings to increase by 16.5% this year, before rising at an average annual rate of 11% over the next five years, thus gaining the attention of growth investors.

Therefore, although the stock has rallied significantly this year, long-term investors could still benefit if they hold their positions.

Technically, Home Depot shares seem to have recently spiked to complete an upward breakout from an ascending channel formation. As a result, the stock has now rallied deep into overbought conditions, creating a perfect opportunity for a technical pullback.

Therefore, investors could target potential pullback profits at about $373.94, or lower at $353.92, while $411.04 and 4429.94 are crucial resistance levels.

Profit-takers could swoop in

In summary, although Home Depot still offers exciting growth prospects at reasonable valuation multiples, the stock has rallied significantly this year pushing it deep into overbought conditions.

Therefore, profit-takers could seize the opportunity before buying back the stock once it pulls back closer to the crucial support zones.