Analyst Sees 45% Upside for RH (RH) Shares Following 4Q Beat


RH (NYSE:RH) shares jumped around 20% this morning after the home design company reported preliminary sales and earnings results for 4Q16, coming in ahead of expectations at the high end of guidance. The company said it expects adjusted fiscal fourth-quarter earnings of 68 cents a share on adjusted revenue of about $590 million, compared to consensus estimates of 65 cents a share on revenue of $584.7 million.

In reaction, Guggenheim analyst Steven Forbes reiterated a Buy rating on RH shares, with a price target of $45, which represents a potential upside of nearly 45% from where the stock is currently trading.

Forbes commented, “The combination of weak sell-side sentiment (~35% BUYs) and lowered expectations following RH’s 3Q should drive a relatively significant positive reaction in RH shares on the back of a modest 4Q beat. Given our belief that the earnings power of the company is bottoming around ~$2.00 per share and our forecast for a return to double-digit top-line growth in 2017, we remain Buyers of the shares despite the 15% after-hours rally.”

“Simply put, we expect RH to reap the benefits of its transformational investments resulting in a meaningful improvement in operating momentum. In addition, the $300 million buyback authorization should also help turn near-term sentiment – we are modestly reducing our estimates but reiterate our BUY and see meaningful upside over the next 12 months,” the analyst added.

According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Steven Forbes has a yearly average return of -4.3% and a 56% success rate. Forbes has a -33.1% average return when recommending RH, and is ranked #3539 out of 4499 analysts.

Out of the 11 analysts polled in the past 3 months, 7 rate RH stock a Hold, while 4 rate the stock a Buy. With a return potential of 24%, the stock’s consensus target price stands at $37.86.