Morgan Stanley started coverage of Home Depot HD at Equal-weight with a $90 price target (11.6 percent upside).
Analyst Simeon Gutman believes the company can maintain mid-teen earnings growth, but instability in the housing industry adds some risk to an investment.
Gutman writes, “Risk/reward is slightly more attractive for other names in our coverage. This is due to our bull case for HD being capped by high-teens to 20% EPS growth and very modest multiple upside potential of half a turn. Our view is that while trends in the home improvement segment will be healthy, there will not be the same acceleration seen in prior years.”
Related: Top 4 Stocks In The Home Improvement Stores Industry With The Highest ROA
As with homebuilders, much of the business outlook is based on macroeconomic factors.
The $90 price target is based on 18 times Morgan Stanley’s 2015 EPS expectation of $5.10.
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