Why RH stock is up over 20% today

Consumers may be struggling at some levels, but they don’t seem to be discounting luxury furniture. RH (RH 23.45%)formerly known as Restoration Hardware, just reported its fiscal second quarter results, which indicated that demand is strong and accelerating.

This report shows the stock rising on Friday morning. The stock was up 22.8% at 11:15 a.m. ET, bringing the stock’s positive return for the year.

RH gains momentum

RH management said its luxury brand’s furniture sales were nearing an inflection point with consumers. The company and investors are now seeing that tipping point become a reality.

RH said demand — defined by the company as the value of orders placed — rose 7 percent in the second quarter and said it may double in the third quarter. In the letter to shareholders, the company stated:

Despite expectations that industry conditions will remain challenging until interest rates ease and the housing market begins to recover, we expect our demand trends to accelerate through fiscal 2024 and into 2025.

The report caused some analysts to gain confidence in RH stock. TD Cowen analysts Max Rakhlenko and Bradley Jamison raised their target price on this firm from $325 to $350 per share. The new price target would still represent a 10% gain even after today’s share price rise. The analysts explained that “we appreciate accelerating demand and increasing market share as novelty resonates despite the tough macro.”

Investors buy into the narrative that RH’s latest product lineup is driving growth. After all, the company is gaining sales despite an environment of high interest rates and a challenging housing market.

If interest rates fall as expected, this is yet another tailwind that could provide momentum for RH and its share price.