Wells Fargo Remains a Buy on RH (RH)

Wells Fargo analyst Zachary Fadem reiterated a Buy rating on RH (RH) yesterday and set a price target of $175. The company’s shares closed yesterday at $123.65.

Fadem said:

“We believe Q3 results (and a strong FY19 outlook) serve as evidence that the macro remains favorable, RH’s model is working, and the company is successfully transforming itself to a faster growing, more profitable business. Total sales grew +7.8% (vs. our +7.3%) in Q3, comprised of 4% comps (vs. our +4.5%, or +6.5% ex: inventory reduction headwind), a +1% outlet contribution, and +3.8% from new galleries/other. Gross margins expanded +377bps to 40.7% (+42bps vs. our model), while SG&A delevered +156bps vs. our +275bps. This drove EBIT margin +221bps to +10.3%, or +161bps above our model, contributing 32c to RH’s 43c adjusted EPS beat ($1.73 vs. our $1.30).”

According to TipRanks.com, Fadem is a 4-star analyst with an average return of 8.4% and a 60.7% success rate. Fadem covers the Services sector, focusing on stocks such as National Vision Holdings Inc, Floor & Decor Holdings Inc, and Advance Auto Parts.

Currently, the analyst consensus on RH is a Moderate Buy with an average price target of $165.10, a 33.5% upside from current levels. In a report released today, Loop Capital Markets also maintained a Buy rating on the stock with a $200 price target.


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Based on RH’s latest earnings release for the quarter ending October 31, the company reported a quarterly net profit of $22.41 million. In comparison, last year the company had a net profit of $13.15 million.

Based on the recent corporate insider activity of 30 insiders, corporate insider sentiment is neutral on the stock.

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RH is a holding company which operates the business through its subsidiary Restoration Hardware, Inc. It offers furniture, lighting, textiles, bathware, decor, outdoor and garden, as well as baby and child products. The company operates an integrated business with multiple channels of distribution including galleries, source books and websites.

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