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RH stock forecast: Can the retailer bounce back to 2021 high?

By Manaswita Ghosh Dutta

Edited by Vanessa Kintu

12:07, 12 April 2022

RH stock forecast: Can the retailer bounce back to 2021 high? Illustration of the financial stock market chart, business investment concept and future stock trading.
RH stock forecast: Can the retailer bounce back to 2021 high? Photo: whiteMocca / Shutterstock.com

High-end furniture retailer RH (RH), formerly known as Restoration Hardware, has been on a rollercoaster ride over the past two years. The high-end furniture retailer, which saw demand for its products increase during the pandemic lockdowns in 2020, also had to deal with a shift in demand earlier this year, largely due to the lower spending capacity of its potential customers. 

Let’s find out what factors are driving this shift in demand and, based on the RH stock analysis, if the RH stock is a buy, sell or hold.

Stock analysis: RH stock performance in 2021 and Q1 2022

RH stock rallied by 19.8% in 2021, hitting an all-time high of $738.52 on 12 August 2021. 

In comparison, the three major stock market indexes in the US – the S&P 500 (US500), the Dow Jones Industrial Average (US30) and the Nasdaq Composite (US100) – rose 27.7%, 18.9% and 22.9%, respectively, during the same period.

In the quarter ended March 2022, however, RH stock plunged 39.2%. The decline came mostly as a result of a shift in demand trends. This shift was due to record inflation, rising interest rates and global uncertainty, all of which affected demand.  

Stock fundamental analysis: Fiscal Q4 earnings 2021

The company reported its fourth-quarter fiscal 2021 results, ended 29 January, on 29 March. The firm’s adjusted net revenue rallied 11% to $902m in the reported quarter, up from $813m a year earlier. The result was within the firm’s guidance range despite the coronavirus variant that raised supply chain issues in the second half of the quarter.

Adjusted operating margin increased to 25.2% from 23.7%, while adjusted net income rose 14% to $164m from $143m. The company also exceeded its adjusted operating margin outlook, up 780 basis points on a two-year basis in fiscal Q4 2021.

RH’s adjusted diluted earnings per share (EPS) increased 12% to $5.66 in fiscal Q4 2021 from $5.07 a year earlier.

The company generated $97m of free cash flow in the fiscal fourth quarter and $477m for the year, including a $191m increase in inventory, nearly $60m of which was because of increased transit times, with the balance targeted to raise its unshipped demand backlog. 

Fiscal 2022 earnings outlook

Looking ahead, the company expects a string of macroeconomic factors to affect the stock in fiscal 2022, including record inflation, rising interest rates and global unrest. 

RH said that fiscal first quarter sales and margin trends remained healthy, owing to the ongoing relief of its backlog. However, it did experience a decline in demand in fiscal Q1 2022, roughly around the time of the start of the Russia-Ukraine conflict in February and the ensuing market volatility.

The company expects its fiscal first quarter net revenue growth to be in the range of 7% to 8%, compared to 78% in fiscal 2021, with adjusted operating margin in the range of 23% to 23.5%, as compared to 22.6% a year earlier. 

Fiscal 2022 net revenue growth is expected to be in the range of 5% to 7%, compared to 32% in the previous fiscal year, with adjusted operating margin in the range of 25% to 26%, compared to 25.6% in fiscal 2021.

RH stock technical analysis

As of time of writing on 11 April, according to TradingView, the Relative Strength Index (RSI) of the RH stock was pointing to ‘neutral’ at 46.81 over a one-month period. The RSI of a stock lies between zero and 100. An RSI reading of more than 70 is considered ‘overbought’; a stock is considered ‘oversold’ or ‘undervalued’ when that value is below 30. 

The stock’s Commodity Channel Index (CCI) (20) also considered the security ‘neutral’ based on a reading of -43.16. The Commodity Channel Index is a momentum-based oscillator that weighs the current mean price against the average mean price over 20 periods. A reading of negative to near-zero to over 100 may indicate an upward tendency in the stock’s price.

The stock’s Moving Average Convergence Divergence (MACD) level (12, 26), however, pointed toward ‘buy’ on the basis of a reading of -10.96, the TradingView data indicated. The MACD is a momentum indicator where the reading is obtained by deducting the 26-period Exponential Moving Average (EMA) from the 12-period EMA.

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RH stock price drivers: Notable factors

The company’s long-term plans to elevate the brand (over a period of 10 years) via new collection launches such as RH Contemporary, RH Couture, RH Bespoke and RH Atelier, among others, are expected to put the stock of the high-end furniture retailer in a sweet spot in the long-run.

RH also plans to build the world’s first consumer-facing architecture, interior design and landscape architecture services platform inside its design galleries, which are located strategically across the world in places such as London, Paris, Munich and Dusseldorf. 

The firm is currently negotiating to open more galleries in Milan, Madrid, Brussels and France. These galleries are expected to generate revenues of $5bn-$6bn in North America, and $20bn-$25bn worldwide.

However, record inflation in the US earlier this year has led the US Federal Reserve (Fed) to take a hawkish stance on monetary policy. Higher interest rates will undoubtedly be a concern for the high-end furniture retailer, as it will affect the key industries the company relies upon for sales, such as the home industry.

Additionally, the company’s growth momentum in 2020, during the pandemic-led lockdown, is cooling. As more Americans had to embrace the stay-at-home, work-from-home trend amid the pandemic, RH stock surged due to high demand for its products. The stock rallied 66.1% during 2020, but now, with economies now open again and many workers returning to offices, the shift in demand for home furnishing products is inevitable. 

RH stock price forecast: Analyst sentiment and price targets

RH 5-year stock price chart

At the time of writing, analyst ratings compiled by MarketBeat suggested different price targets for the RH stock. The consensus rating was ‘buy’ based on 16 analyst views as of 11 April 2022.

Out of the 16 analysts covering the stock, 12 rated it as a ‘buy’, while the remaining four rated it a ‘hold’. These analysts came from Loop Capital, Goldman Sachs Group, Bank of America, UBS Group, Barclays, JPMorgan Chase & Co., Oppenheimer and Wolfe Research, among other firms.

The analysts’ consensus 12-month RH stock price target was $581.60. It had an upside potential of 77.48% based on the closing price of $335.78 on 8 April. Stock projections varied from a low price target of $375 to a high of $770.

Of the most recent ratings, Wolfe Research analyst Chris Bottiglieri rated the stock as ‘hold’ with a price target of $197, and an upside of 9.87%.

According to the algorithm-based RH share price forecast from WalletInvestor, as of 11 April, the RH stock could reach a maximum price of $496.771 by December 2022. The service suggested the stock could be valued at $692.901 by the end of December 2023, $889.099 by the end of 2024 and $1,085.208 by the end of 2025. 

Although WalletInvestor did not provide targets for 2030, its longer-term RH stock prediction expected the price to hit $1,281.232 in December 2026 and $1,301.428 in April 2027.

When looking for an RH stock price target, it’s important to bear in mind that analysts’ forecasts may be wrong. Projections are based on making fundamental and technical studies of the RH stock performance and RH stock news. Past performance is no guarantee of future prices.

It is important to do your own research, and remember that your decision to trade depends on your attitude to risk, your expertise in the market, the spread of your investment portfolio and how comfortable you feel about losing money. Remember, you should never invest money you can not afford to lose.

FAQs

Is RH stock a buy?

RH stock may be considered a buy based on recent analyst ratings and price predictions. The firm’s long-term business goals are also ambitious, and could make it apt for investment at the moment.

However, when considering whether to invest in the company’s stock, you should always do your own research, taking into account other factors such as the outlook and relevant market conditions. A number of factors dictate whether stock prices rise or fall.

Why has the RH stock price been going down?

RH stock has been going down due to the effects of record inflation, rising interest rates and global uncertainty on the demand for its products.

Will RH stock price go up or down?

Based on the algorithm-based RH share price forecast from WalletInvestor, the RH stock price was expected to go up in the years ahead. The stock was predicted to hit $496.771 by December 2022 and $1,085.208 by the end of 2025.

Note, however, that analysts’ forecasts can be wrong and shouldn’t be used as a substitute for your own research. Always conduct your own due diligence before investing, and never invest or trade money you cannot afford to lose.

Markets in this article

RH
Restoration Hardware
279.88 USD
-7.13 -2.490%
US500
US 500
5562.1 USD
-29.1 -0.520%
US100
US Tech 100
19721.1 USD
-93.9 -0.470%
US30
US Wall Street 30
40928.9 USD
-310.9 -0.750%

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