Is Home Depot Ready To Be Built Back Up? (Technical Analysis)

Summary:

  • Technical analysis shows the current stock price of Home Depot is accelerating.
  • Home Depot has shown relative strength during the pandemic and shows conservative future growth from my fundamental analysis.
  • Home Depot’s market potential might be underway to take on new positions optimally.

Home Depot Reports Record Quarterly Sales

Justin Sullivan/Getty Images News

Home Depot (NYSE:HD) is an American home improvement retailer selling hardware, construction products, and various services. It is also the largest home improvement retailer based out of the US. This retailer performs relatively well during downtimes like recessions or pandemics. Based on this article, this stock should perform relatively well, as shown in the forward-looking guidance.

Fundamental Subtle Strength

Growth

Revenue growth has been relatively steady and has nearly doubled since 2018. Moreover, net income growth has drastically improved between 2021 and 2022. This appears to be due to the worst of the pandemic near an end as economies open with more commercial and residential renovations underway.

Metric

2018

2019

2020

2021

2022

Period

FY

FY

FY

FY

FY

Revenue growth

0.067

0.072

0.019

0.199

0.144

Gross profit growth

0.063

0.082

0.011

0.194

0.133

Ebit growth

0.093

0.058

0.020

0.154

0.261

Operating income growth

0.093

0.058

0.020

0.154

0.261

Net income growth

0.085

0.289

0.011

0.144

0.277

Source: Financial Modelling Prep

Data

According to its simple moving average, Home Depot’s stock price has remained positive over the last 200 working days. However, over the previous 20 working days, there has been new momentum in the stock price of Home Depot.

Home Depot is rated relatively strong for the retail sector and the general top 500 stocks in the USA compared to other industry sectors. As many companies have shown declines, Home Depot should be considered part of your portfolio based on this year’s simple moving average.

Metric

Values

SMA20

7.96%

SMA50

10.28%

SMA200

4.28%

Source: FinViz

Source: Market Watch

Enterprise

The stock price for Home Depot appears to have accelerated since 2020, when the pandemic started. This may be due to people renovating their homes over that time. Market capitalization has also accelerated and seems to continue this year. One exciting fundamental metric is how Home Depot could build new stock price momentum as the economy might improve next year. One major factor that could help boost Home Depot’s stock price for 2023 is expected falling inflation.

Metric

2018

2019

2020

2021

2022

Symbol

HD

HD

HD

HD

HD

Stock price

184.980

184

227.940

260.290

320.250

Number of shares

1.178 B

1.137 B

1.093 B

1.074 B

1.074 B

Market capitalization

217.906 B

209.208 B

249.138 B

279.551 B

343.949 B

Enterprise value

241.339 B

236.632 B

279.316 B

309.722 B

387.875 B

Source: Financial Modelling Prep

Estimate

There is an apparent conservative growth estimate in terms of revenue for Home Depot, while profit will likely stay consistent. As a result, earnings per share could grow 50%, hopefully boosting Home Depot’s stock price significantly over the next six years. Another fundamental metric that could help drive the stock price is the company’s future EBITDA estimates.

YEARLY ESTIMATES

2022

2023

2024

2025

2026

2027

Revenue

150,031

156,847

159,220

163,504

171,260

174,193

Dividend

6.20

7.39

8.52

9.41

9.60

Dividend Yield (in %)

1.99 %

2.20 %

2.37 %

2.73 %

3.02 %

3.08 %

EPS

15.49

16.60

17.09

18.09

19.94

22.57

P/E Ratio

20.14

18.78

18.25

17.24

15.64

13.82

EBIT

22,955

24,087

24,260

25,019

26,625

28,728

EBITDA

25,665

26,793

26,949

27,931

29,953

30,136

Net Profit

17,007

17,079

17,646

18,776

21,052

Net Profit Adjusted

16,446

17,018

16,834

17,158

19,223

19,436

Source: BusinessInsider

Technical Analysis Shows Optimal Time for Entries

Fibonacci

A similar pattern can be said for Home Depot, with its past trend line with the historical peak in the fall of 2020 followed by a steep decline in stock price. The key to long-term longevity will be how long Home Depot’s stock price can recover. Market Estimate expectations would be that stock price momentum will need to be shown for this to happen.

fibanacci home depot

fibanacci home depot (custom platform)

Bollinger Bonds

Home Depot stock price momentum may be underway, as shown in the simple moving average of the last 20 working days. Also, one can confirm this with the Bollinger upper band being crossed by the current stock price.

bollinger home depot

bollinger home depot (customer platform`)

MACD

Based on the MACD signal line crossing through the zero line in the lower panel of this chart, one can take away that it might be an optimal time to initiate market order entries of Home Depot. If price momentum continues to accelerate, I think one can make quick returns in a short period.

macd home depot

macd home depot (custom platform)

RSI

As the current RSI continues to build towards the overbought market condition, one can see that this will be short-lived, as with the same events in the prior two years. For price momentum to build, it will need to be correlated with the performance of the overall major market indices.

rsi home depot

rsi home depot (custom platform)

Prediction via AI

Monte Carlo

Using artificial intelligence, one can see that in this Monte Carlo simulation with near even split between the predicted paths of upward and downward potential, the current Home Depot stock price could be short-lived.

On the other hand, the accompanying normalized distribution chart appears to be evenly split, which could confirm this theory of the current stock price accumulation.

monte carlo home depot

monte carlo home depot (custom platform)

Regression

The 30-day forecasted red regression line is moderated, meaning the Home Depot stock price may increase slower than one might think.

regression home depot

regression home depot (custom platform)

Price vs. Short Volume

As Home Depot’s stock price grows, the short trading volume drops against all total trading volume. This could be considered an encouraging sign as fewer people appear to be worried about stock performance.

short home depot

short home depot (custom platform)

Source: StockGrid

Sell or Buy Risk?

Recommendation

Considering market analysts are calling out a sell rating with the recent daily neutral rating, this quickly turned to buy rating recommendations as the stock price of Home Depot accelerated.

Interval

RECOMMENDATION

BUY

SELL

NEUTRAL

One month

SELL

2

14

10

One week

SELL

5

11

10

One day

NEUTRAL

9

7

10

Source: Trading View

Sustainability

Home Depot’s sustainability has been underperforming, which could potentially threaten those pension fund activists in the coming years.

Metric

Value

Social score

5.51

Peer count

54

Governance score

3.63

Total esg

12.54

Highest controversy

2

ESG performance

UNDER_PERF

Percentile

5.49

Peer group

Retailing

Small arms

False

Environment score

3.4

Source: Yahoo Finance

Conclusion

Home Depot could be an exciting stock to own over the next few years. It is possible to see steady price upswings. As the stock price accelerates, it hints at a moderated incline with outperforming returns. As a looming recession will be upon us, Home Depot may be a big retailer as folks travel less and spend more on their homes based on what they can afford. As a result, it might be wise to buy the stock of Home Depot for moderate successful profit long term.


Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.


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