Home improvement retailer Home Depot (NYSE:HD) briefly served as a pandemic darling, as homeowners who faced a lot more time in their homes decided it was a good time to fix them up. Now, it’s lost a lot of that ground but is eager to get it back. To rebuild its losses, it’s looking to a surprising source: Mexico. However, investors aren’t exactly pleased with the plan and sent shares down modestly in Tuesday afternoon’s trading.
Home Depot aims to have 150 locations in Mexico and plans to open 12 stores in 2024. It’s also planning to add more items to those locations, offering more stock related to pets, home decorations, and furniture. Given that Home Depot already has 138 stores in Mexico, the addition of 12 more will bring it to its goal by the end of the year.
A Flat Housing Market Means Good News for Home Depot
Meanwhile, in the wider market, Home Depot is looking for the housing market in the United States to remain relatively static. In fact, it’s bet about $18 billion that it will, as demonstrated by its purchase of SRS Distribution. Basically, Home Depot seems to be expecting the housing market to remain flat and for people to stay where they are.
That means a lot more home repairs as people keep their current houses in light of high-interest rates, which are likely to stay elevated for at least the rest of this year. With three rate cuts expected—though their exact amount is in question—there may be some relief later this year, but possibly not enough to trigger a surge in home buying.
Is Home Depot a Good Long-Term Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on HD stock based on 18 Buys, seven Holds, and two Sells assigned in the past three months, as indicated by the graphic below. After a 25.59% rally in its share price over the past year, the average HD price target of $385.23 per share implies 5.85% upside potential.
