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Pro: ‘risk-reward for Home Depot looks very favourable’

By:
on Sep 11, 2022
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  • Max Wasserman makes a bull case for Home Depot Inc on CNBC.
  • Shares of the home improvement retailer are down over 25% YTD.
  • Wall Street has a consensus overweight rating on "HD" as well.

Home Depot Inc (NYSE: HD) is having a hard time this year but the future, as per Max Wasserman (Miramar Capital) is very different for the home improvement retailer.

Reasons to invest in Home Depot Inc

Wasserman agrees the next month or so might continue to be a struggle for the Atlanta-headquartered multinational but picking it down here at about 17 times earnings, he’s convinced, will pay off in the long run.

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$900 billion TAM, there’s 130 million houses, 50% of which are over 40 years old. So, in home repair, they’re doing a great job. They’re growing big ticket items at 9.0%. We think the risk-reward for Home Depot looks very favourable.

A dividend that’s been growing at a steady pace over the past five years and a sizable share repurchase programme were among other reasons cited for the constructive view.

Home repair wasn’t just a COVID phenomenon

Last month, Home Depot reported better-than-expected results for its fiscal second quarter.

More importantly, Wasserman expects “home repair” to be resilient even though the COVID restrictions have been removed. On CNBC’s “Closing Bell: Overtime”, he said:

50% of their revenue is coming from the professional side showing no signs of de-acceleration and even the individuals that DIY are still doing a lot of home repairs. Home Depot is tied to house appreciation, not necessarily new home sales.

In August, the U.S. median listing price was up 36.9% versus the 2019 equivalent.

Investing in Home Depot may be a smart move also because the Wall Street has an average price objective of $358 on this stock.