Shares of home furnishings company RH took a hit following disappointing earnings, but Wells Fargo sees this as a buying opportunity. In premarket trading on Friday, the stock plummeted 7.3% to $261.00. RH reported an unexpected quarterly loss and expressed concerns about the housing market remaining stagnant. Additionally, the release of its new catalog will be delayed until the first quarter, and discounts will put pressure on profits.
While Wells Fargo analysts, led by Zachary Fadem, acknowledged the unsatisfactory results, they believe there is reason for optimism due to potential Federal Reserve interest-rate cuts. Although RH still has some challenges ahead, in a lower rate environment, it has the potential to thrive. Wells Fargo suggests considering purchasing RH shares if they dip to around $250, as stated in a recent note. Furthermore, they have adjusted their price target for the shares from $335 to $315.
The recent surge in mortgage rates, spurred by an aggressive campaign of interest-rate increases, has been burdensome for homeowners. However, there may be light at the end of the tunnel as the market is now factoring in the anticipation of rate cuts starting in March of next year.
While RH faces headwinds, Wells Fargo remains bullish on the company's prospects given the potential for lower interest rates. Only time will tell if this assessment proves accurate.
