UBS Stays Bullish On Home Depot After Meeting With Management

UBS analysts met with Home Depot Inc HD executives and the three main takeaways prompted the research firm to reiterate a bullish stance on the stock.

The Analyst

UBS' Michael Lasser maintains a Buy rating on Home Depot with a $215 price target.

The Thesis

Home Depot presented a new list of strategic priorities in 2017 and early results are positive, Lasser wrote in a note. Specifically, management prioritized making stores easier to shop, leveraging the IT infrastructure and making the supply chain "more seamless" across the entire company.

Home Depot's 2017 gameplan should translate to 100 basis points of comp contribution this year along with market share gains, the analyst wrote. Management expressed its belief it is in a position to continue making gains for years to come.

Lasser said the executive team also discussed its desire to avoid becoming heavily promotional as it is sticking to its Everyday Low Price (EDLP) mantra. Instead, the company will focus on gaining market share among the professional market through its Pro Xtra loyalty program.

The current macro environment is consistent with management's prior expectations. The company continues to expect the aging housing stock and rising home equity to provide a "sturdy" foundation for home improvement spending. A slowdown is inevitable and average ticket metrics will likely serve as the first sign of a changing housing cycle although there is no indication of ticket trends turning negative.

Price Action

Shares of Home Depot traded higher by 1% at $210.18 Monday afternoon.

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