At Home Explodes 46% On Quarterly Sales Jump; Wells Fargo Says Hold

At Home Group (HOME) shares are jumping 46% in Thursday’s pre-market trading after the home décor company said that comparable store sales  rose a preliminary 42% in the second quarter.

The stock is soaring to $13.81 in pre-market trading as the company reported preliminary second-quarter net sales of about $515 million fueled bypent-up demand and stimulus spending” tied to the coronavirus pandemic. In addition, it expects to post net income of at least $82 million and adjusted EBITDA of at least $150 million.

“We are emerging from this pandemic stronger and even better positioned, and we believe we are gaining meaningful market share,” At Home CEO Lee Bird said. “As a home décor category killer, we are becoming the go-to place for consumers looking for a one-stop shop that offers a wide and deep assortment, compelling everyday low prices, the convenience of omnichannel shopping, and safe social distancing afforded by our large store format.”

Bird added that he expects the company to “report the best quarter in our history as a public company in terms of comparable store sales, sales, and profitability, and the lowest leverage ratio”.

Furthermore, At Home disclosed that in July it sold three of its properties for a total of approximately $33 million.

With shares already up a whopping 71% so far this year, the $6.25 average analyst price target now indicates 34% downside potential. (See HOME stock analysis on TipRanks)

Following the encouraging preliminary Q2 sales figures, five-star analyst Zachary Fadem at Wells Fargo, more than doubled his price target to $14 from $6, but maintained a Hold rating on the shares, saying that “visibility is a sticking point”.

“While these results are very impressive and we clearly missed the boat here, we would be reluctant to chase shares, as transitory tailwinds likely fade, seasonal inventory availability could prove constraining and the back-to-school and holiday seasons appear in flux,” Fadem wrote in a note to investors. “While we are raising our FY21/22 EPS estimates from -32c/13c to $1.52/$1.00 to reflect HOME’s newfound strength, lack of visibility keeps us from being more constructive.”

In line with Fadem’s outlook, the rest of the Street has a Hold analyst consensus on the stock which breaks down into 4 Holds and 1 Sell.

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