TOL - RH Stock: A Difficult Q1 With A Concerning Outlook

2024-06-14 15:05:50 ET

Summary

• RH shares plunged 18% after disappointing earnings and are down nearly 20% for the year.
• Q1 results show margin weakness, with RH gross margins down and SG&A spending up.
• Its reaffirmed outlook raises questions, with concerns about demand, revenue growth, and management credibility, given the macro environment.
• RH shares still have a premium multiple, which can come under further pressure.

Shares of RH ( RH ) plunged 18% on Friday after reporting a disappointing earnings report. This adds to a year of underperformance, with shares down nearly 20%. I last covered RH in March , rating shares a “hold,” while urging investors to rotate into other housing-sensitive stocks, like the home builders who have performed better. In hindsight, this recommendation was not sufficiently cautious, with shares down 31% since that analysis. As such, now is a critical time to review RH....

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