Home Depot Won in the Pandemic. One Analyst Now Says It’s a Buy.

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Home Depot could begin buying back stock this year, the analyst says.

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Home Depot

stock is getting a lift following an upgrade from Guggenheim, which says the home improvement retailer’s profits will rise thanks to recent investments.

Analyst Steven Forbes raised his rating on Home Depot (ticker: HD) to Buy from Neutral, and established a $310 price target for the stock. The move comes on the heels of the company’s acquisition of HD Supply, its recent $3 billion debt offering, and a more moderate valuation, which stands in contrast to the stock’s historical premium, he said.

Forbes originally moved to the sidelines with Home Depot in September of 2019, concerned that the company’s investment plans would weigh on profit margins. While management is still spending, he forecasts strategic investment will fall year over year in the second half of 2021, giving a lift to margins. The “2022 margin implications could be even greater as the weight of up to $900 million of incremental investment spend begins to roll off.” he wrote.

That leaves him confident that the company can return to a more normalized EBIT margin next year, leading to mid- and eventually high-single digit

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