Home Depot stock is now a buy, as analyst cites strong housing market and aging infrastructure

The stock HD, -3.87% slipped 0.2% in afternoon trading, erasing an earlier gain of as much as 1.3%. The stock has now shed 6.6% since it closed at a record $416.18 on Dec. 7, but still had run up 14.9% over the past three months while the Dow Jones Industrial Average DJIA, -0.56% had gained 5.5%.

Ciccarelli assumed coverage of Home Depot with a buy rating, after it was rated hold at Truist for at least the past three years. The stock price target was raised to $448 from $420.

“With existing home inventory levels near historic lows, we expect continued home price appreciation, which should drive further home investment activity,” Ciccarelli wrote in a note to clients. “Further, housing infrastructure continues to age, with ~65% of single family homes in the U.S. now at 30+ years old and older houses need more maintenance/repair activity.”

He said Home Depot’s more than $11 billion investment in its supply chain to provide next- and same-day delivery on large parcel product to more than 90% of the U.S. population should help the company gain market share and expand its reach into newer markets.

Also read: Home Depot teams up with Walmart’s GoLocal for speedy delivery service.

“Home Depot is ~50% bigger than its top-rival Lowe’s, providing it with unrivaled size and scale in the favorable home improvement sector,” Ciccarelli wrote. “Heavy investments in the company’s One Home Depot strategy should help accelerate share gains in this still highly fragmented sector.”

Home Depot’s stock has rallied 41.8% over the past 12 months, while Lowe’s Companies Inc. shares LOW, -2.95% have hiked up 47.8%. In comparison, the SPDR S&P Homebuilders exchange-traded fund XHB, -2.07% has advanced 34.3% over the past year and the Dow has gained 16.8%.