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RH Stock Higher as Analysts Laud Earnings Report

RH is 'gliding toward luxury multiples, as it inches toward international gallery openings in 2022,' said JPMorgan's Tami Zakaria.

RH (Restoration Hardware)  (RH) - Get RH (Restoration Hardware) Report shares rose sharply Thursday, as analysts reacted positively to the home furnishings titan’s stronger-than-expected fiscal-second-quarter earnings report.

The Corte Madera, Calif., company’s profit registered $7.09 a share in the quarter ended July 31, topping analysts’ forecast of $6.44.

RH recently traded at $722.91, up 7.5%.

J.P. Morgan’s Tami Zakaria raised her price target to $800 from $770, affirming her overweight rating.

“We continue to believe that RH’s long-term targets of 8%-12% sales growth, at least 25% operating margin, 15%-20% income growth through the ongoing real estate transformation (U.S. and global), and operating platform redesign are a rarity in the retail landscape,” she said.

“We see RH gliding toward luxury multiples, as it inches toward international gallery openings in 2022.”

Barclays's Adrienne Yih boosted her price target to $897 from $885, reiterating her overweight rating.

“RH continues to elevate the luxury home and leisure lifestyle,” she said. 

“Once again, RH proved the power of the brand, delivering significant upside to sales, driven by continuation of a healthy high-end housing market backed by an elevated brand and product offering.”

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Cowen's Max Rakhlenko and Oliver Chen reiterated RH outperform with an $850 price target.

“Second-quarter sales rose 39% year over year and EBIT margin reached 26.6% as RH flexes its retail chops,” they wrote.

“Demand trends are accelerating, and guide implies second-half sales up 13.7% to 17.1% year-over-year, with the two-year stack increasing at the high-end of the fiscal 2021 guide.”

Jefferies’s Jonathan Matuszewski lifted his price target to $640 from $620, sustaining a hold rating.

“Strong demand for luxury homes and record wealth creation bode well for RH's core customer,” he said.

“Earnings-per-share growth ahead should be fueled by gallery conversions and product elevation. The international debut will be key to brand expansion, and the impact of tax policy changes in Washington is a key to monitor.”

Matuszewski said, “Results were solid,” but “the magnitude of outperformance is waning.”

KeyBanc's Bradley Thomas reiterated the stock sector weight, calling RH “one of the most compelling LT growth stories in our coverage." 

But he affirmed the more conservative rating “given valuation and our expectation of decelerating trends.”