Should You Buy the Post-Earnings Selloff in Home Depot Stock?

Core Viewpoint - Home Depot reported weaker-than-expected earnings for the third consecutive quarter, leading to a significant drop in stock price, with management lowering its earnings guidance for the year [1][2]. Financial Performance - In fiscal Q3, Home Depot earned $3.74 per share, below the expected $3.84, with same-store sales growth at only 0.2% [1]. - The company now anticipates a 5% decline in adjusted earnings per share for the year [2]. - Following the earnings report, Home Depot's shares have decreased approximately 20% from their September high [2]. Strategic Positioning - Despite the earnings dip, management asserts that Home Depot maintains its market-leading position and is gaining market share from competitors [3]. - The recent acquisition of GMS contributed about $900 million to quarterly sales, indicating strategic expansion into the higher-margin professional contractor segment [3]. Digital and Operational Growth - Home Depot's digital platform sales grew by 11% year-over-year, showcasing successful omnichannel execution and operational improvements [4]. Dividend and Valuation - The company offers a healthy dividend yield of 2.73%, making it an attractive option for investors [4]. - Home Depot is currently trading at a price-sales (P/S) ratio of 2.23x, which is considered inexpensive relative to its historical multiples [6]. Market Outlook - The Federal Reserve's interest rate cuts are expected to drive a recovery in Home Depot shares, particularly as the housing market begins to thaw [5]. - Home Depot's exposure to both professional contractors and DIY clients positions it well to benefit from a potential housing market recovery [5]. Analyst Sentiment - Despite the recent earnings miss, Wall Street analysts remain bullish on Home Depot shares [7].