The shares of this home décor company were just upgraded by BB&T Capital Markets to “buy”, and analysts have raised their earnings estimates by six cents in the past 90 days.
Restoration Hardware (RH)
from Cabot Top Ten Trader
Business-wise, Restoration Hardware (RH) has done exactly what I thought it would—grow rapidly as it transforms the high-end home furnishings industry, taking tons of market share in the process. Sales (up 24% and 15%) and earnings (23% and 28%) have cranked along, and the firm is executing its big-picture real estate plan. The firm’s new showroom in Atlanta (about 70,000 square feet!) has proven to be a hit, and the company is plowing ahead with another few mega-stores to open in the quarters ahead.
The stock, however, is still heading generally sideways—partly due to the market environment, no doubt, but also due to some hesitation surrounding the housing market as mortgage rates perk up. But I think it’s a matter of time before the stock gets going; earnings estimates are still big (up 32% this year, and another 25% in 2016), and institutional investors continue to accumulate shares (400 funds owned shares, up from 315 a year ago and 176 the year before that).
To me, this long consolidation feels like a big launching pad, with any decisive move above 100 likely kicking off a sustained uptrend that should take the stock far.
Bottom line: I still like RH. It’s a hold if you own some, and I believe any breakout above 100 is buyable.
Michael Cintolo, Cabot Top Ten Trader, www.cabot.net, 978-745-5532, June 24, 2015