Since 1978, Home Depot (NYSE: HD) has been helping building professionals. It’s also helping “do-it-yourselfers” get access to the supplies they need for their construction projects. With about 40,000 products total, Home Depot is a paradise for homeowners across the country. And with the recent runup in housing, now is a good time for a Home Depot stock forecast.

Home Depot is America’s 4th-largest retailer with over 2,000 locations in North America. In fiscal year 2021 it recorded sales of over $120 billion. Its typical customer tends to visit about 13 times per year and spend $978 annually.

These numbers are part of the reason why Home Depot’s stock has enjoyed well over a 100% run over the past five years. So, with the worst of the pandemic hopefully in the rearview, is this the perfect time to invest in Home Depot stock? Or does the threat of the COVID delta variant mean that you should stay away?

Let’s take a quick look at a Home Depot stock forecast…

NOTE: I’m not a financial advisor and am just offering my own research and commentary. Please do your own due diligence before making any investment decisions. 

3 Reasons Home Depot Stock Forecasts Have Surged

When the COVID-19 lockdowns were announced and the concept of “essential businesses” was created, businesses were artificially separated into winners and losers based on their business model. Home Depot was undoubtedly a quarantine winner. It was labeled as an essential business and enjoyed a surge in foot traffic as people attacked home projects during the lockdowns.

There were three major booms that have helped push Home Depot stock predictions higher after it nosedived in early March 2020: 

1. The Do-It-Yourself Housing Boom – Cooped-up homeowners frequented Home Depot in order to stay productive and finish home projects during the quarantine. Additionally, many remote workers were in need of supplies so that they could spruce up their new home offices.
2. The Red-Hot Housing Market – Due to a combination of record-low interest rates and record-high savings of Americans, tons of families rushed to buy homes in 2020 and 2021. More home buying means more construction, more maintenance and more trips to Home Depot.
3. Spiking Lumber Prices – Tight supply lines and a surge in home construction caused the price of lumber to skyrocket from $500 to $1,500 per thousand board feet in early 2021. Even though the price has come back down to normal levels, this surge helped boost Home Depot’s profits. Here are two of the top lumber stocks to buy.

So how does the Home Depot stock forecast look going forward? There are many predictions out there and this insight should help…

Home Depot Stock Forecast

Quite honestly, to a degree, Home Depot falls in with Amazon (Nasdaq: AMZN), Google (Nasdaq: GOOG) and Disney (NYSE: DIS) in the sense that it’s never a bad idea to include their stock in your portfolio.

This is partly because Home Depot enjoys a fairly inelastic demand when it comes to its business and products. By this, I mean that people will always need to have a home, which means they will almost always have a need to visit Home Depot. This explains why Home Depot’s revenues have been increasing for years and bodes well for Home Depot stock in the long run.

You could argue that people could always start going to a competitor for their home supply needs, which is definitely a possibility. However, there’s really only has one major competitor: Lowe’s (NYSE: LOW). The lack of more competition makes it easier for forecasting Home Depot stock going forward.

For all intents and purposes, Home Depot and Lowe’s have essentially the same business and offer the same products. However, in a head-to-head comparison, Home Depot has a slight edge:

• In fiscal year 2021, Home Depot recorded $42 billion more in sales than Lowe’s did.
• Home Depot’s has a market capitalization of $340 billion compared to $140 billion for Lowe’s.
• Home Depot has a dividend yield of 2% compared to 1.5% for Lowe’s.
• Home Depot posted a 2021 earnings-per-share (EPS) of $11.94 compared to $7.75 for Lowe’s.
• For what it’s worth, Home Depot also has a slight edge in terms of social media followers. Home Depot’s Instagram has 1.2 million followers vs. 812k for Lowe’s and its Twitter has 410k vs. 285k for Lowe’s.

Other major home improvement retailers such as Ace Hardware, Menards, True Value, 84 Lumber and Empire Today just don’t really compete in terms of total sales or locations.

If business continues as usual, Lowe’s and Home Depot will both continue to dominate the home improvement industry. This is an important factor when determine a Home Depot forecast.

It’s tough to say how they will perform in the short term, however, Home Depot’s stock has excellent long-term potential. It also continues to reward investors…

Home Depot Dividend

If you’re not familiar, a dividend is a portion of earnings that companies pay back to their shareholders on a per-share basis. For investors, dividends are basically payments that they can expect to receive just for being a shareholder in a company.

When it comes to Home Depot, it has been consistently increasing the size of its dividend over the last 10 years. In 2011, it paid a quarterly dividend that amounted to $1.04 /share annually. Its dividend has risen every year and was up to $6/share annually in 2020. It has already raised its payment in 2021 and is on pace to pay out $6.60/share annually to shareholders.

This means that if you owned 10 shares of Home Depot (approximately $3,200) you can expect to receive $66 in dividends throughout the year.

When considering any home depot stock forecast, it’s important to consider the risk factors as well…

Home Depot Stock Risk Factors

The main risk for Home Depot stock right now is that the U.S. housing market is considered overvalued by many investors. While Home Depot has profited nicely on the housing surge, a potential crash would be detrimental to its business.

More foreclosures would mean fewer people are working on improving their homes, which would result in less profit for Home Depot. Even if they aren’t foreclosed on, if home values were to plummet then homeowners would likely be less inclined to shell out money in order to fix up their home. This would also result in lower profits for Home Depot and a potential drop in their stock price.

I hope that you’ve enjoyed this Home Depot stock forecast and remember that all investment decisions should be based on your own due diligence and risk tolerance.

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