Telsey upgrades Home Depot, sees Fed rate cuts as a boost to shares

Home Depot could be a beneficiary of the Federal Reserve’s latest rate cutting cycle, according to Telsey Advisory Group. The investment firm upgraded shares of the home improvement retailer to outperform from market perform ahead of Home Depot’s third-quarter earnings release on Tuesday. Analyst Joseph Feldman also lifted his price target to $455 from $360, which implies upside of 14% from Thursday’s close. “We have developed increased confidence in a return to solid sales and earnings growth in 2025 and beyond, with a number of recently heightened catalysts for the business,” the analyst wrote. As a catalyst, Feldman cited upcoming Fed rate cuts. Home Depot is one company that should benefit from an easing monetary cycle, since lower interest rates could boost increased consumer spending in home improvement going forward. The Fed has embarked on a new rate-cutting cycle as inflation pressures have eased. On Thursday, the Fed lowered rates by a quarter-percentage point . Traders also expect another quarter-point reduction next month . Home Depot can also benefit from hurricane recovery in the coming months following Hurricanes Helene and Milton. This recovery could last through multiple quarters in 2025, per Telsey. HD YTD mountain HD YTD chart Feldman added that Home Depot could also rise as easier comparisons support better sales results after post-pandemic demand trends have normalized. A significant opportunity has also risen for the company to grow its Pro business. “Taken together, we now project a return to outperformance relative to the S & P 500 over the next year, following underperformance dating back to our downgrade to Market Perform on August 8, 2023,” Feldman wrote. Home Depot shares are up more than 15% year to date. Also on Friday, Feldman upgraded shares of fellow home improvement retailer Lowe’s to outperform from market perform, with his $305 price target — up from $275 — representing upside potential of 15%. “We are maintaining our 3Q24 and annual estimates, with continued softness for Lowe’s topline in the near term due to difficult comparisons and industry headwinds. However, we have developed increased confidence in a return to solid sales and earnings growth in 2025 and beyond, with a number of recently heightened catalysts for the business,” he wrote. Shares of Lowe’s have rallied 20% in 2024. LOW YTD mountain LOW YTD chart