Re.: HD's valuation.
Joe,
I agree that Home Depot stock is not cheap in term of valuation, and as share holders we need watch it closely.
But as the industry leader, I think it deserves a higher P/E premium compare to companies like Lowes (LOW).
By the way, where did you get the "Homer Depot P.E. is presently above 60"? According to BaseLine, I got these historical numbers:
HD's 6-year-high P/E is 69 in 1992.
Current 12-month trailing P/E is 55.1 (48.5/0.88 = 55.1)
Current 12-month forward P/E is 44.9 (48.5/1.08 = 44.9)
The Wall Street tends to value a stock based on its forward EPS rather than its trailing EPS. So it's very possible to see HD trading around 50s or even 60s later this year.
As of the downgrade, I think based on the similar reason, Raymond James should downgrade MSFT, DELL, CPQ, IBM, KO ...
In term of Technical Analysis, let me quote the comments from the Second Opinion:
Symbol: HD
Name: HOME DEPOT INC
Exchange: NYSE
COMMENT
MACD indicates a BULLISH TREND
Chart pattern indicates a STRONG UPWARD TREND
Relative Strength is BULLISH
Up/Down volume pattern indicates that the stock is under ACCUMULATION
The 50 day MOVING AVERAGE is rising which is BULLISH
The 200 day MOVING AVERAGE is rising which is BULLISH
LOOK FOR SUPPORT AT 42.73
RECOMMENDATION
STOCK IS A BUY
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