Home Depot hits $450? 1 Wall Street analyst thinks so.

Home Depot (HD -0.78%) has struggled in recent years with a sluggish real estate market. Sales and profits have fallen following a boom during the pandemic, and management can’t do much to correct this.

However, the stock has started to return to previous highs on bets that falling interest rates will lead to a housing market rebound, benefiting the retailer, and a Wall Street analyst just upgraded the stock on that trend.

Image source: Home Depot.

Gordon Haskett calls Home Depot a buy

Gordon Haskett raised his rating on Home Depot from hold to buy on Wednesday, saying trends in the housing market are beginning to change.

Although a recent survey said that demand for home improvements is still low, trends appear to be bottoming out as interest rates reach a point where respondents are more interested in spending money on the home improvement category.

The research firm expects trends to improve next year, favoring Home Depot. He gave the stock a price target of $450, implying a 9% upside for the stock.

Is Home Depot a buy?

Much of Home Depot’s expected recovery appears to have come at a price, as the stock is up 22% over the past three months, even as business performance is yet to improve significantly. It is now trading at a price-to-earnings ratio of 28, which seems expensive relative to its performance.

However, a year from now, business could be booming as rates should be about 1.5 percentage points lower and pent-up demand from the recent housing slowdown should be triggered.

Given its lead in the home improvement retail market and future cyclical tailwinds, the stock looks like a good bet to keep moving higher.