Shares of The Home Depot, Inc. (HD Quick QuoteHD - Free Report) have lost 8.1% in the past month, slightly better than the Zacks Retail - Home Furnishings industry's decline of 9.8%. However, this prominent player in the home improvement market has underperformed the Retail-Wholesale sector and the S&P 500's declines of 1.9% and 3.1%, respectively, in the same period. The stock now sits 16.1% below its 52-week high of $426.75 reached in September 2025.

HD’s 1-Month Performance

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However, the stock has fared better than its key peers such as Lowe’s Companies Inc. (LOW Quick QuoteLOW - Free Report) , Williams-Sonoma, Inc. (WSM Quick QuoteWSM - Free Report) and Floor & Decor Holdings, Inc. (FND Quick QuoteFND - Free Report) in the past month. Lowe’s, Williams-Sonoma, and Floor & Decor Holdings have posted declines of 11.5%, 14% and 15%, respectively.

Closing at $357.92 on March 6, Home Depot is trading below its 50 and 200-day simple moving averages of $372.18 and $376.63, respectively, indicating an unfavorable technical setup for the stock.

HD Trades Below 50 & 200-Day Moving Averages

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Factors Hurting HD’s Recent Performance?

Home Depot’s performance has been particularly weak following its fourth-quarter results, wherein revenues missed estimates. The decline in sales was primarily due to the absence of storm-related activity in the fiscal fourth quarter, which reduced demand in several key categories. Persistent consumer uncertainty and ongoing housing market pressure continued to weigh on home improvement spending, limiting the company’s ability to capture incremental demand in the quarter.

The earnings report reinforced concerns that the company continues to face a challenging demand environment across the home improvement market.

One of the primary headwinds has been weakness in housing-related activity. Management highlighted that high mortgage rates and the sharp increase in home prices since 2019 have reduced housing affordability, which, in turn, has weighed on home turnover. With fewer homes being bought and sold, demand for renovation and home improvement projects has softened, limiting sales growth for the retailer.

Consumer caution has also played a key role. Management noted that customers remain concerned about broader economic uncertainty, including inflation, job stability and higher financing costs. These factors have made consumers more reluctant to commit to large discretionary projects, which typically drive higher-value transactions for Home Depot.

Large remodeling projects remain under pressure. While the company has seen stable demand in repair and maintenance categories, bigger discretionary projects have not yet recovered meaningfully. This shift in spending behavior has limited the upside in big-ticket sales despite some strength in professional contractor demand.

Industry-specific dynamics have also created pressure. For instance, the roofing market experienced a sharp downturn, with industry shipments falling significantly, which weighed on related sales categories and forced pricing investments to maintain market share.

Taken together, a weak housing backdrop, cautious consumers and pressure on large project spending have constrained Home Depot’s recent performance and contributed to the negative stock reaction following its latest earnings release.

HD’s Downward Estimate Revisions Raise Concerns

The Zacks Consensus Estimate for Home Depot’s fiscal 2026 suggests 4% and 2.6% year-over-year increases in sales and EPS, respectively. For fiscal 2027, the consensus estimate indicates 4.4% and 8.9% rallies in sales and EPS, respectively. The consensus estimate for EPS for fiscal 2026 has fallen 0.5% in the past 30 days. Meanwhile, the estimate for fiscal 2027 EPS has moved down by a penny in the past seven days.

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Are HD’s Long-Term Growth Prospects Intact?

Despite near-term pressures, the long-term growth prospects of Home Depot remain largely intact, supported by strategic investments and a strong focus on professional customers. Management emphasized that the company is continuing to invest across its business to strengthen its core operations, enhance its interconnected retail experience and expand capabilities, aimed at serving professional contractors (“Pros”).

A key pillar of this strategy is the Pro ecosystem, where the company is seeing encouraging traction. Pros that utilize Home Depot’s integrated capabilities, including sales support, project management and delivery solutions, are spending more with the retailer. In the fiscal fourth quarter, Pro sales outperformed the DIY segment and posted positive comparable growth, highlighting the resilience of professional demand even in a softer macro environment.

The company is also expanding through initiatives such as its SRS business, which continued to grow organic sales and gain market share despite weak industry demand. Management expects SRS to deliver mid-single-digit organic sales growth in fiscal 2026, supported by new locations and cross-selling opportunities with Home Depot’s broader platform.

While housing turnover and large discretionary projects remain pressured in the near term, Home Depot believes its investments in Pro capabilities, supply chain and interconnected retail will help it gain market share and drive long-term growth once housing and renovation activity normalize.

HD’s Valuation Snapshot

Home Depot is currently trading at a forward 12-month price-to-earnings (P/E) multiple of 23.57X, which positions it at a premium compared with the industry’s average of 21.31X and the sector's 23.97X. The stock is also trading above its median P/E level of 22.45X observed in the past five years. The valuation suggests that Home Depot is overvalued.

This valuation positioning becomes clearer when viewed alongside key peers. While HD trades at a premium to Lowe’s (with a forward 12-month P/E ratio of 19.77X) and Williams-Sonoma (20.28X), it trades at a discount to Floor & Decor Holdings (27.78X).

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How to Play HD Stock?

Home Depot faces several near-term challenges that have weighed on its recent stock performance. Weak housing turnover, cautious consumer spending and softer demand for large discretionary projects have pressured results, while the revenue miss in the fourth quarter triggered share declines. Downward estimate revisions and the stock’s premium valuation suggest limited upside in the near term.

That said, Home Depot’s long-term prospects remain intact. Ongoing investments in its Pro ecosystem, supply chain and interconnected retail capabilities should support market-share gains as housing and renovation demand recover. Investors may consider holding on to the stock for long-term gains while remaining cautious in the near term. The stock currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.