Did anyone say retailers are struggling in 2020? Luxury-furniture company RH (RH) must have been out delivering its wares when the memo arrived. The stock has rebounded sharply since the March lows and year-to-date is up by a strong 80%. The question is: Does RH stock have more fuel in its tank to drive even more value into shareholders’ pockets?
Covering the stock for Wells Fargo, analyst Zachary Fadem rates RH an Overweight (i.e. Buy) along with a $400 price target. What’s in it for investors? A modest upside of 5%. (To watch Fadem’s track record, click here)
So, what tickled Fadem’s fancy in the home furnishings specialist’s latest financial results? Well, apart from a revenue beat of $8.4 million and Non-GAAP EPS of $4.90 coming in well ahead of the $3.34 estimate, plenty, as it happens.
Fadem said, “Despite elevated expectations, RH’s Q2 update impressed across the board with sharp demand improvement (core +7%/+32%/+34% in May/June/July), a 29% EBIT beat (vs our above-Consensus model) and a surprisingly bullish 2H outlook comprised of ~18% sales growth and ~22% EBIT margins. Despite considerable COVID-challenges (re-opening, supply chain constraints, restaurant closings, etc.), we believe the power of RH’s model shined in Q2… In our view, the RH story continues to impress, and despite heightened valuation, we see incremental drivers ahead (International, Hospitality, Design, etc.) and a backdrop that should remain supportive.”
As a result, Fadem raised his FY20 and FY21 EPS estimates by 37% and 23% to $16.55 and $18.55, respectively.
Overall, Fadem is broadly in line with the rest of Wall Street, which has assigned RH slightly more “buy” ratings than “holds” over the past month — and sees the stock growing only 4% from current levels. (See RH stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
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