The Dow Jone is sputtering – but Bank of America just gave one core stock a major upgrade as the index struggles to set a new record high.
After the S&P 500 notched a new record yesterday, the Dow Jones Industrial Average (DJIA) is the final one of Wall Street’s three primary indices still languishing below its pre-pandemic highs.
If today’s action is any guide, it’s going to be a while before it gets there.
As of 9:37 am ET on Wednesday, the Dow had gained a paltry 34.74 points or 0.13%. That lifted the index to 27,812.81.
The Dow’s current closing record is 29,551.42, which the index set on February 12.
The S&P 500 followed its record close with a gain of 0.16%. It last traded at 3,395.30.
The Nasdaq narrowly outperformed its peers, rallying 0.19% to 11,231.64.
The Dow needs a boost if it’s going to join the S&P 500 and Nasdaq in record territory. According to Bank of America, it’s about to get one – from a place you might not expect.
While tech stocks have been the unquestioned leaders of the market’s ascent, BofA just turned bullish on a brick-and-mortar company. It’s not just any brick-and-mortar store, though. It’s one that will actually sell you both bricks and mortar: Home Depot.
Home Depot may not be the sexiest stock in the index, but it’s quietly gained more than 30% in 2020 alone. The overall Dow Jones Industrial Average is still down more than 2.5%.
And Bank of America says HD shares still have plenty of upside.
BofA upgraded Home Depot to “buy” in reaction to its blockbuster earnings report – which revealed the home improvement retailer’s strongest sales growth in almost two decades. Watch the video below for more details.
BofA put a $330 price target on the stock, implying futures gains of more than 15%. Analysts predict an “urban exodus” will provide long-term tailwinds to the home improvement industry.
We are upgrading HD to Buy from Neutral and raising our price objective to $330 from $290 after HD’s record 2Q results, which we believe will not be the last of HD’s strong run. Our PO is based on 28x our 2021 EPS estimate.
Although home improvement spending in the coming quarter may decelerate amidst sequentially declining government stimulus/ unemployment benefits, we believe that the longer-term tailwinds for the home improvement industry are generally favorable, as we’ve discussed in our Home Work series, due to wallet share shift into the home and urban exodus.
Home Depot is currently the third most heavily weighted stock in the Dow Jones, accounting for roughly 7% of the total index.
That share will increase in less than two weeks, when Apple’s four-for-one stock split knocks the nearly $2 trillion tech giant off its perch as the Dow’s most influential component.