Weekly Stock Study: Home Depot (HD)
Home Depot is the largest home improvement retailer in the United States, operating over 2,200 stores across the US, Canada, and Mexico. With a history dating back to its founding in 1979 by two entrepreneurs, Home Depot has grown exponentially, offering a wide range of merchandise at low prices with highly trained staff.
Had you invested $1,000 in Home Depot at its IPO on September 22, 1981, and reinvested dividends and held it till today, it would be worth over $12.5 million. This impressive growth has not gone unnoticed by Wall Street analysts, who have issued ratings and price targets for The Home Depot in the last 12 months.
Analyst Estimates and Price Targets
Thirty Wall Street analysts have issued ratings and price targets for The Home Depot in the last 12 months. Their average twelve-month price target is $296.26, predicting that the stock has a possible upside of 1.20%. The high price target for HD is $350.00, and the low price target is $215.00.
There are currently five hold ratings and 25 buy ratings for the stock, resulting in a consensus rating of "Buy." Power Traders love to see this type of divergent opinion on a stock that is widely traded. The high level of interest from analysts indicates a strong potential for growth in the future.
Recent Earnings and Sales Results
On February 23, the company reported better-than-expected Q4 earnings and sales results. Home Depot earnings grew 16% to $2.65 a share, while revenue rose 25% to $32.26 billion. Same-store sales surged 24.5%, with U.S. comparables up 25%. This impressive performance has further solidified the company’s position as a leader in the home improvement market.
Competition and Market Trends
Home Depot (HD) has made many millionaires of shareholders, with a stock price that has more than doubled in the past five years. However, this does not mean it will continue that upward trajectory indefinitely. Analysts feel that Home Depot has a fence to keep Amazon at bay, which is what has many analysts feeling that HD promises more upside potential.
Home Depot management has focused on creating a brand that is the go-to choice for pros looking to get the job done. They have also built out their ecommerce platform to deliver parts curbside or by mail for those who do not want to come into the store. Keeping Amazon out of a leadership position in the hardware market is the tailwind that is making Home Depot rise in price.
52-Week Trading Range and Resistance
Over the last 52 weeks, HD has traded as high as $296.78 and as low as $174. This provides an annual trading range of $122.78. When we divide this metric by 52 weeks, we can determine that the average weekly trading range for CHD is roughly $2.36.
Whenever we trade, we always pay attention to where we are in relation to the 52-week trading range. It is very common to see the 52-week high provide very strong resistance to the market until it is breached. Often when the 52-week high is breached, we will see the stock price explode higher very quickly over a very short period of time.
The adage in trading that is very workable is that old resistance becomes new support. This perspective worked extremely well in navigating Home Depot over the last year. The company was crushed like most stocks with the economic lockdown in March 2020 but rallied strong off its lows on March 18, 2020.
Using AI to Predict Trends
Power Traders use VantagePoint Software and artificial intelligence within to monitor trend forecasts by monitoring the slope of the predictive blue line. The black line is a simple 10-day moving average of price which simply tells you what has occurred in the market.
The predictive blue line also acts as value zone where in uptrends traders try to purchase the asset at or below the blue line. In studying the chart below, pay close attention to the relationship between the black line and predictive blue line.
Fine-Tuning Entries with Neural Net Indicator
At the bottom of the chart is the Neural Network Indicator which predicts future strength and/or weakness in the market. When the Neural Net Indicator is green, it communicates strength. When the Neural Net is red, it is forecasting short-term weakness in the market.
We advocate that Power Traders cross-reference the chart with the predictive blue line and neural network indicator to create optimal entry and exit points. This allows traders to make informed decisions based on real-time data and trends.
Price Range Prediction
One of the powerful features in VantagePoint Software is the Price Range prediction forecast. This forecast permits Power Traders to truly fine-tune their entries and exits into the market.
At 6:30 pm after the market close, the software updates, and all of the price predictions change based upon what the machine learning, AI, neural networks, and Intermarket analysis anticipate moving forward. This feature allows traders to stay ahead of the curve and make informed decisions in real-time.
Intermarket Analysis
Studying the charts can always provide objective realities in terms of locating support and resistance levels which become very clear on a chart. However, we live in a global marketplace where everything is interconnected.
The billion-dollar question for traders is always what are the key drivers of price for the underlying asset that I am trading? These intangibles are invisible to the naked eye yet are responsible for driving prices.
There is great value to be had in studying and understanding the key drivers of HD price action. The universe and the most statistically correlated assets are all displayed from a standpoint of statistical correlations which show the strongest interconnectedness of prices.
Conclusion
Our suggestion – HD is fairly valued at the present time, but the trend is firmly up. The consensus of analysts’ opinions shows that HD is fairly valued around $295. Power Traders are in at lower prices and are placing their protective stops below the bottom of the predictive low channel.
HD is a great swing trading stock. We have it firmly on the radar and look to buy weakness when the AI forecasting that uptrends are on the horizon.
Disclaimer
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