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

HD -0.63%

Home Depot (HD) stock closed more than 6% down on Tuesday after the home improvement retailer reported its third consecutive quarter of weaker-than-expected earnings.

The company earned $3.74 on a per-share basis in its fiscal Q3, falling short of the $3.84 that analysts had expected, as same-store sales grew just 0.2%, reflecting demand weakness that extends beyond seasonal patterns.

More News from Barchart

• Warren Buffett Says to Embrace Stock Volatility Because ‘A Tolerance for Short-Term Swings Improves Our Long-Term Prospects’

• Down 30% in a Month, Should You Buy MicroStrategy Stock Here?

• ‘Good News’ Is Coming for Nvidia Stock, So Buy NVDA Shares Here

• Get exclusive insights with the FREE Barchart Brief newsletter. Subscribe now for quick, incisive midday market analysis you won't find anywhere else.

Home Depot stock tumbled Tuesday also because the management lowered its guidance as well, now expecting adjusted earnings per share (EPS) to decline by 5% this year.

Following the post-earnings dip, HD shares are down some 20% versus their September high.

Reasons to Buy Home Depot Stock on Post-Earnings Dip

Despite muted earnings, there are several reasons for longer-term investors to load up on HD stock on the post-earnings pullback.

According to management, the company retains its market-leading position and continues to steal share from rivals, and the recent acquisition of GMS contributing about $900 million to quarterly sales demonstrates strategic expansion into the higher-margin professional contractor segment.

In the third quarter, Home Depot saw its digital platform sales grow by 11% on a year-over-year basis, indicating successful omnichannel execution and operational improvements that position the company well for future recovery.

A healthy 2.73% dividend yield on Home Depot shares makes up for another great reason to own them heading into 2026.

Fed’s Rate Cuts to Drive HD Shares Higher in 2026

Interest rate dynamics present the most compelling catalyst for a meaningful recovery in HD shares next year.

The Federal Reserve has already started cutting rates, with expectations for further reductions in 2026 expected to thaw the long subdued housing market.

Home Depot's exposure to both professional contractors and do-it-yourself (DIY) clients positions it to benefit significantly from a potential housing market recovery.

More importantly, the NYSE-listed firm is now trading at a price-sales (P/S) ratio of 2.23x only, which makes it rather inexpensive to own relative to its historical multiple.

What’s the Consensus Rating on Home Depot?

Wall Street analysts also remain bullish on Home Depot shares despite its subpar earnings release on Tuesday.

The consensus rating on HD stock currently sits at “Moderate Buy” with the mean target of roughly $432 indicating potential upside of well over 25% from here.

This article was generated with the support of AI and reviewed by an editor. On the date of publication, the editor did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com