BofA Sees More Room for Home Depot Shares

Why It Matters

The upgraded stance signals confidence that Home Depot’s Pro‑focused strategy can outpace peers, offering investors a differentiated growth catalyst amid a soft housing market.

Key Takeaways

• BofA reinstates Home Depot coverage with buy rating, $374 target.
• Pro segment now ~50% of sales, delivering five quarters of growth.
• Recent $24B acquisitions expand reach into roofing, drywall, HVAC markets.
• Expected 20‑bp margin compression in 2026 due to integration costs.
• Housing demand and homeowner equity remain key upside drivers.

Pulse Analysis

Bank of America’s renewed endorsement of Home Depot underscores a strategic shift toward professional contractors, a segment now comprising roughly half of the retailer’s revenue. By assigning a buy rating and a $374 price target—about 20% above the current share price—BofA signals that the Pro business’s resilience, demonstrated by five consecutive quarters of positive comparable sales, offers a defensible moat against broader housing softness. This perspective positions Home Depot as the preferred stock within the home‑improvement sector, appealing to investors seeking exposure to a more stable, B2B‑oriented revenue stream.

The firm’s aggressive acquisition program, exceeding $24 billion, further amplifies that competitive edge. The $18.25 billion purchase of SRS Distribution adds significant roofing, landscape and pool distribution capabilities, while the $5.5 billion acquisition of Gypsum Management & Supply (GMS) deepens drywall and interior construction reach. Collectively, these deals broaden Home Depot’s total addressable market to an estimated $700 billion of professional‑contractor spend. However, BofA flags a near‑term margin squeeze—about 20 basis points in 2026—as integration costs and modest comparable‑sales growth temper earnings momentum.

Beyond corporate actions, macro‑level housing dynamics remain the swing factor. Record homeowner equity, now around $34 trillion, could eventually fund larger renovation projects, yet current affordability pressures keep turnover low and DIY demand muted. BofA’s outlook hinges on a gradual rebound in housing activity and weather‑driven repair cycles, which would unlock the full upside of Home Depot’s expanded Pro platform. For investors, the blend of strategic acquisitions, a growing professional‑contractor base, and a valuation premium to long‑term averages presents a nuanced risk‑reward profile that merits close monitoring.