Home Depot sluggish after downgrade

Goldman Sachs lowers its rating for the home improvement chain, citing tough macro and housing data.

By TheStreet Staff Oct 5, 2010 12:05PM

thestreetBy Andrea Tse, TheStreet


Updated: 8 p.m. ET.

Shares of Home Depot (HD) were largely left out of Tuesday's rally after the stock was downgraded by Goldman Sachs (GS).


Goldman Sachs lowered its rating for Home Depot to "neutral" from "buy" on less compelling valuation and upside.

Home Depot shares dipped this morning but finished up 0.2% to $31.47 to $31.74, the second-worst performer among the 30 stocks in the Dow Jones Industrial Average ($INDU). The Dow finished the day up 193 points, or 1.8% to 10,945, its best close since May 3.


"The company is executing well, but as the stock has bounced off the bottom in the midst of choppy macro data and soft channel checks and into tougher sales and margin compares over the next two quarters, valuation and upside are less compelling," Goldman Sachs analyst Matthew Fassler explained in an investor note.

"The exceptional HD turnaround story is still very much under way but is well understood by the market today."


Fassler said he's becoming increasingly selective on the do-it-yourself sector in the face of "tough" macro data and "uninspiring" channel check. He added that housing data remain weak.

"While we have noted a diminished correlation between sector sales and housing turns, leading indicators are subdued."


Goldman Sachs currently has a $35, 12-month price target for Home Depot stock.  Home Depot is up 9.7% on the year, sixth-best among the Dow stocks.  


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