Restoration Hardware Restored To A Buy Rating At Deutsche

RHRHpoor performance throughout 2016. Deutsche Bank's Adam Sindler upgrades RH's stock rating from Hold to Buy with a price target boosted from $80 to $84. Sindler actually downgraded RH to Hold a few weeks before its second-quarter earnings report due to his belief that the business had "stabilized" and the company needs to convince the Street that there is room for upside. And this is exactly what happened in the earnings report when management's gross margin guidance for the bottom half of 2017 came in "well ahead of expectations."

In fact, RH can likely stabilize its gross margins in the 36–37 percent range, which is near peak levels, Sindler noted. On several occasions, the company's quarterly margin rate moved above 38 percent and while the analyst's model doesn't assume this level of rebound it does serve as a key element of upside moving forward.

Looking forward, Sindler is modeling RH to see its total sales rise 10 percent on annual basis, which is at the midpoint of the company's own 8–12 percent projection. Also, improved new store productivity and a better than expected recovery in the first half of 2018 will add to the bullish story.

At time of publication, shares of RH were up 3.36 percent at $74.04.

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