Home Depot Is A Great Momentum Stock: Should You Buy?

Home Depot Store Front

Home Depot (HD) is the largest home improvement retailer in the United States, and it has benefited nicely from COVID-19 lockdowns and attendant remote lifestyles. The question is, with its impressive financials and fundamental strength, will HD be able to retain its luster as investors now begin to focus on turnaround stocks as mass vaccination drives promote outdoor activities? 

The Home Depot, Inc. (HD) has gained 26.3% over the past year, delivering one of the highest returns in the home improvement industry. With the housing market boom and rising demand for do-it-yourself home renovations and improvement projects, HD has soared 12.3% over the past nine months.

However, with the rapid COVID-19 vaccine drive that has already  inoculated one in four adults in the United States, home lockdowns are expected to wane and outdoor activities are expected to witness a strong comeback. Moreover, with President Biden’s vow to vaccinate 100 million American within the first 60 days in office, down from previous projections of 100 days, pent-up demand for outdoor spending is expected to take precedence in the near term.

HD didn’t provide a financial outlook for fiscal 2021 in its latest quarterly report, which did not sit well with investors. As a result, the stock has declined 3% over the past month.

However, HD is expected to regain its momentum as remote working becomes the norm, with most companies working toward establishing a hybrid work model. Moreover, the housing market boom should have a positive spillover effect on the home improvement industry, allowing HD to attain fresh highs soon.

Here’s what we think could shape HD’s performance in the near term:

Resurging Demand

The faster-than-expected macroeconomic recovery and demand for turnaround outdoor stocks have caused HD to slump over the past couple of months. However, the remote working culture is causing a massive exodus from crowded metropolises  to quieter suburbs, thereby increasing the demand for home decoration, improvement and renovation products. Moreover, with the remote working model freeing up time, do-it-yourself home renovation trends are expected to remain strong.

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