On Thursday, shares of Home Depot Inc (HD) - Get Home Depot, Inc. Report and Lowe's Companies, Inc. (LOW) - Get Lowe's Companies, Inc. Report were hit on news of Sears Corporation (SHLD) moving its Kenmore brand to Amazon.com, Inc. (AMZN) - Get Amazon.com, Inc. Report . On Friday, that weakness continued for Home Depot, with shares falling about 0.3%. The stock is down about 4.5% over the past two days.
Home Depot is becoming reminiscent of Costco Wholesale Corporation (COST) - Get Costco Wholesale Corporation Reportwhen Amazon acquired Whole Foods Market (WFM) for $13.2 billion. At least, that's according to TheStreet's founder Jim Cramer, who also manages the Action Alerts PLUS charitable trust portfolio.
Speaking on CNBC's "Stop Trading" segment Friday, Cramer said analysts were quick to defend Costco despite the Amazon news with Whole Foods. Analysts are now doing the same thing by defending Home Depot.
The real concern may go beyond Amazon and Sears. Cramer cited comments from Sherwin-Williams (SHW) - Get Sherwin-Williams Company Report management that said there seems to be some softness in do-it-yourself work.
That would be bad news for companies like Home Depot and Lowe's. However, Cramer also said that, while paint still did well, it was not as strong as other segments in the DIY category. That could suggest that it's an industry-specific worry and not as broad as a sudden slowdown in home improvement spending.
Still, the idea that home improvement could experience some softness may weigh on the stocks. Currently trading at 21.8 times earnings, Home Depot could see its price-to-earnings valuation slip below 20. Even though it's a great company he has liked for quite some time, Cramer recognizes when Home Depot could experience pressure on its stock and said that may be what's at hand now.
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