It was not so long ago that we heard about homeowners getting interested in home improvement projects again. With the holiday season coming up, and entertaining at home to follow, it is not so surprising to see homeowners take an interest in perking up the space in which they will spend quite a bit of time for the next few months. Home improvement giant Home Depot (HD) is in line to get a big share of that interest as well. But investors were still skeptical, and sent Home Depot shares down nearly 2% in Thursday afternoon’s trading.
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We remember that the UBS Evidence Lab Housing Intentions Survey found that 59% of homeowners planned to take on a home improvement project in the next year. But what more recently came to light was that 53% of those homeowners planned to turn to Home Depot to get the necessary supplies for those projects.
That is, of course, good news for Home Depot. With a market increasingly interested in home improvement projects and a large portion of that market planning to get its supplies from Home Depot, this should put Home Depot in an excellent position going forward. Better yet, with holiday shoppers increasingly looking for value over style, Home Depot gets another opportunity to advance its sales at a time of year when people are most inclined to shop.
Bringing Back Orion
Meanwhile, Home Depot is also proving to be a critical lifeline for one company: Orion Energy Systems (OESX). While Orion did not specifically name Home Depot in its press releases, instead describing its big client as a “Fortune 100 enterprise” as well as “one of the most respected retailers in the world,” the broad notes Orion used were sufficient for most to make the leap.
The problem, though, is that some are regarding Orion’s deal with Home Depot as “…between being a partner and a crutch.” One report noted, “Without Home Depot, the company is essentially a ~$64 million operation with much thinner margins and far less predictability.” Home Depot is, therefore, critical to Orion’s success going forward.
Is Home Depot a Good Long-Term Buy?
Turning to Wall Street, analysts have a Strong Buy consensus rating on HD stock based on 19 Buys and six Holds assigned in the past three months, as indicated by the graphic below. After a 3.4% loss in its share price over the past year, the average HD price target of $446.30 per share implies 16.79% upside potential.
