At Home Beats 2Q Profit; Stock Drops 14%

At Home Beats 2Q Profit; Stock Drops 14%At Home Group reported better-than-expected earnings in the second quarter fueled by comparable-store sales. However, its shares fell over 14% in after-hours on Tuesday due to inventory constraints. The company expects inventory constraints to become a significant factor, which could lead to moderation in the growth trend.At Home (HOME) reported earnings of $1.41 per share in 2Q that beat analysts’ estimates of $1.31. Meanwhile, its revenue of $515.2 million came marginally ahead of analysts’ expectations of about $515 million. Total sales jumped 50.5% on a year-on-year basis, driven by comparable-store sales growth of 42.3%. The home decor retailer witnessed strong demand after the reopening of its stores.HOME’s CEO Lee Bird stated, “We delivered the best quarter in the company’s history in terms of comparable store sales, profitability and free cash flow, as well as our lowest leverage ratio since our IPO.” He added that “Q3 has started off exceptionally well with quarter-to-date comparable store sales relatively in line with Q2, as we continue to gain market share.” (See HOME stock analysis on TipRanks).Following the company’s 2Q preliminary results release, on July 31, Merrill Lynch analyst Curtis Nagle upgraded At Home Group to Buy from Sell and raised the price target to $16.50 (29.3% downside potential) from $5. Nagle noted that the company is going beyond industry sales expectations and that the leverage will be much lower after this quarter. The analyst views the stock’s valuation attractive and believes that “a higher multiple is warranted on higher confidence on sales/EPS growth through the next 2-3 yrs.”Currently, the Street has a cautious outlook on the stock. The Hold analyst consensus is based on 4 Holds and 1 Buy. Given the year-to-date share price rally of over 324%, the average price target of $10.13 implies downside potential of 56.6% to current levels.Related News: Zoom Video Pops 23% On Blowout Quarter With Sales Soaring 355% Apple Asks Suppliers To Build 75 Million 5G iPhones – Report Tesla Plans To Raise $5B Via Share Bonanza; Stock Gains 3% In Pre-Market More recent articles from Smarter Analyst: AbbVie To Face US House Committee Subpoena In Drug-Pricing Probe Yext Earnings Preview: RBC Sticks To Buy Call, Sees Revenue Beat Nvidia To Roll Out New Graphic Gaming Chips This Month; Analyst Lifts PT Caleres Gains 5.6% in After-Hours On Quarterly Beat

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