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Asset Watch

Could Home Depot hit $400?

Thursday, February 22, 2024

A quiet calm came over Home Depot on Feb. 20 as the home improvement giant reported mixed fourth-quarter earnings. While the company outperformed analysts’ revenue and earnings estimates, management noted “softer engagement in big-ticket discretionary categories, like flooring, countertops and cabinets.”
Yet, despite a challenged housing market dealing with high-interest rates, Oppenheimer Senior Analyst Brian Nagel said after the release that “the company is doing a good job of managing their margins…. It’s solidly profitable. They generate a ton of cash. There’s a lot of levers they’re pulling to do that.”
As a result, Home Depot largely sidestepped its typical earnings volatility, with the stock ending the Feb. 20 session near the flatline.

But is that a good thing for the bulls?

In December 2023, Home Depot broke out above its intraweek and closing highs set in May 2021, March and December 2022, and January and August 2023. After a successful retest in January 2024, the breakout was verified, and the stock has traded above the key level ever since. Therefore, the medium-term outlook remains constructive.

When Home Depot soared to a record high in mid-to-late 2021, the 20-week moving average was a major support level. The stock never closed below it, and intraweek dips were bought, making it a key momentum indicator that needs to hold for the stock to hit $400.

So, is boring Home Depot a new bull case, or is this the calm before the storm?


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