Prediction: Home Depot’s Turnaround Could Be Bigger Than Investors Expect
HD earns a BUY with a $385 price target after Q2 comps turned positive and monthly U.S. comps accelerated to 2.2% by July.
Home Depot's 24x P/E premium over Lowe's (LOW) 18x reflects superior pro-channel scale, while Floor & Decor (FND) battles negative comps.
SRS Distribution targets $400M in system-wide cross-selling this year, and 21 analysts rate HD a Buy or Strong Buy with zero Sell calls.
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Home Depot's stock has stabilized after a rough year, and our proprietary model sees the setup for a real re-rating higher. Our 24/7 Wall St. price target for Home Depot ( NYSE:HD ) is $385.03, implying 14.4% upside from the $335.90 current price. Our recommendation is buy with a high confidence level of 90%.
Q2 fiscal 2026 marked the clearest turnaround signal in two years, and investors are still discounting the operating leverage embedded in the model.
Home Depot is down 16.07% over the past year and roughly flat year to date, well below the $418.06 52-week high.
Q2 fiscal 2026 broke the pattern of lukewarm results. Revenue grew 5.71% to $47.86 billion, adjusted diluted EPS reached $4.92, and comparable sales turned positive 1.7%. Management said results "exceeded our expectations," with monthly U.S. comps accelerating from 0.5% in May to 2.2% in July.
Housing remains the constraint. Existing home sales sit at 4.06 million annualized, still soft, and management said "there's just no sign of an inflection point at this moment."
The bull case rests on operational leverage meeting a housing thaw. SRS Distribution comped above the company average, 90% of stores closed an SRS sale in the past 12 months, and management targets $400 million in system-wide cross-selling this year.
Digital sales grew 11%, the fifth straight quarter of double-digit online growth, and 13 of 16 merchandising departments posted positive comps.
Analysts skew constructive: 4 Strong Buy and 17 Buy ratings against zero Sell calls. Our bull-case scenario, assuming mortgage-rate relief and big-ticket recovery, points to $428.68 within 12 months.
Traffic remains negative. Comparable transactions declined 1% in Q2, and Q1 operating margin compressed to 11.9% from 12.9% a year earlier. SG&A rose 8.5% on SRS integration, and ROIC slipped to 24.8% from 27.2%. Housing starts fell to 1.24 million in July, down 12.4% month over month.
Bulls counter that ROIC decline and SG&A growth largely reflect acquisition amortization (roughly 40 basis points of margin drag and $0.50 of EPS from intangibles) rather than core business weakness. Our bear case still projects $347, a modest positive return.
The most direct comparison is Lowe's ( NYSE:LOW ), which trades at just 18x earnings versus Home Depot's 24x. Lowe's carries a lower multiple partly reflecting its smaller professional-channel exposure. Home Depot's premium is defensible given superior professional-channel scale via SRS and stronger ROIC.
Floor & Decor ( NYSE:FND ) offers the growth-versus-value counterpoint. FND is contending with negative comps, showing how much tougher the specialty-retail category has been. Against this peer set, our 24/7 Wall St. price target of $385 looks reasonable.
Our 24/7 Wall St. price target of $385.03 reflects a buy call at 90% confidence. Q2's broad-based comp acceleration alongside SRS synergies beginning to show in results is the tipping factor.
The bullish thesis hinges on average ticket strength and pro-channel share gains persisting into fiscal 2027. The bearish scenario materializes if July housing starts mark the start of a fresh downturn rather than seasonal noise. On balance, the risk-reward skews positive.
Here is where our model projects Home Depot could trade, assuming SRS integration continues and housing turnover gradually normalizes.
These projections assume Home Depot executes on SRS cross-selling and pro-channel expansion. Significant upside or downside could result from a sharper-than-expected housing recovery or prolonged elevated mortgage rates.
Contact editorial@247wallst.com for any questions or corrections.
