Things already weren’t looking that great for RH (NYSE:RH) and its public face Restoration Hardware. The upscale furniture and home improvement brand is certainly facing tough times, but a note from Wedbush may have torpedoed it in today’s trading, if nothing else. RH stock is down over 18% in Friday afternoon’s trading after Wedbush declared it far too pie-in-the-sky for anyone’s tastes.
Wedbush, via analyst Seth Basham, didn’t pull any punches in assessing RH’s prospects. While Basham left the Neutral rating in place, the price target got the rug pulled out from under it and dropped 22% to $250. The biggest problem? RH may be engaging in some wishful thinking with its projections, and given the way things are currently, that wishful thinking may end up a disappointment.
It’s worth noting that, so far, Basham has enjoyed a 59% success rate on RH stock, with an average return of 44.69% per rating.
While RH is planning an ad blitz along with new gallery openings, that’s not likely to prove much help in an environment where even dollar stores are feeling the pinch. And with furniture demand typically lagging behind any interest rate changes—which aren’t exactly assured—that’s just another pin in the balloon of RH’s projections.
A European Expansion Might Help
One point that RH is likely banking on to provide support is its recent expansion in Europe and the United States. Spreading out like that could be helpful, especially as conditions in one area often aren’t a match for conditions everywhere. It’s already opened in Brussels and Madrid, but it will likely take a little time before we see what effect those have on the bottom line. In fact, early reports suggest that we won’t know for another year just what kind of impact the RH expansion into Europe will offer, and even then, the inflation and housing market slowdowns seen over there aren’t exactly inspiring confidence.
Is RH Stock a Good Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on RH stock based on four Buys, five Holds, and one Sell assigned in the past three months, as indicated by the graphic below. After a 19.76% loss in its share price over the past year, the average RH price target of $327.90 per share implies 44.35% upside potential.
