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Home Depot Nailed 2020. Why the Stock Could Do It Again in 2021.

A Home Depot store is seen in Washington, DC.

Nicholas Kamm/AFP via Getty Images

With the year almost over, we’re taking a look at all 30 stocks in the Dow Jones Industrial Average, starting with the worst performers— Boeing and Walgreens Boots Alliance —and working our way up to the highest-flying stock in the benchmark— Apple. The ranking may shift before the close of 2020 trading, but the stories behind the stocks shouldn’t.

The Covid-19 crisis has been a boon for Home Depot (ticker: HD), as consumers poured money into their homes. That means tough comparisons in 2021 for the home improvement giant—which gained about 22% in 2020—although many expect that larger trends will remain in its favor.

Home Depot and similar companies like Floor & Decor Holdings (FND), Lowe’s (LOW), RH (RH), and Williams-Sonoma (WSM) were winners this year, as more people purchased and upgraded their living arrangements—a necessity given the rise of remote working and learning. That said, Home Depot has faced worries about increased costs, high expectations and predictions that its rival Lowe’s is gaining on the company.

Since the pandemic has been such a major part of Home Depot’s success story in 2020, investors might be nervous about what mass vaccination and a reopened economy could do for the stock. Some investors may be concerned that consumers could pull back their home spending if their big projects are already completed.

Bulls, however have plenty of points to contradict that narrative: Some expect a robust holiday season, while others point to strong home spending trends that played out even as many restrictions were lifted this summer. Others point to Home Depot’s acquisition of HD Supply as a future catalyst, as well as the potential benefit from the next round of stimulus checks.

With Covid-19 infections jumping in the U.S., the winter will likely see many consumers nesting once again in their houses. New homeowners, meanwhile, may need to make ongoing investments in their purchase even after the pandemic wanes.

Analysts favor the odds of ongoing success for Home Depot shares: More than 70% of the 31 analysts tracked by Fact Set have a Buy rating or the equivalent on the stock, with an average price target of $310.12 on the Street. There is one lone bear.

The next big event to watch for the stock could be Home Depot’s fiscal fourth-quarter earnings, due out in late February.

Write to Teresa Rivas at [email protected]

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