Why Home Depot Stock Withered on Wednesday

A raft of post-earnings price target cuts was the key factor behind Home Depot (NYSE: HD) stock's slide on Hump Day. The company published its third-quarter figures the previous day, and a clutch of analysts didn't hesitate to make downward adjustments while the ink was still wet.

A mixed third quarter

Home Depot's frame three wasn't a disaster, but it wasn't a raging success either.

Image source: Getty Images.

The company managed to grow its sales by almost 3% year-over-year to $41.4 billion; however, much of that rise came from a recent acquisition (construction materials company GMS). Same-store sales, a more revealing metric, increased only marginally over that time. On a per-share basis, net income according to generally accepted accounting principles (GAAP), decreased1% to $3.62.

Analysts were expecting higher profitability, although the company beat on the top line. Meanwhile, its adjustments to full-year guidance resulted in a slightly higher sales growth projection, but reduced expectations for per-share earnings.

Several of those pundits shaved their price targets in reaction. Among the analysts was RBC Capital's Steven Shemesh, who now believes Home Depot's fair price is $376 per share, down from the previous estimate of $401.

According to reports, Shemesh expressed concern that the retailer is suffering from softened demand. In the future, rising concerns about the state of the U.S. economy are likely not to help the situation.

The near future doesn't look bright

If I were a Home Depot stockholder, I'd worry about the same factors. Since housing is expensive to build, the construction sector -- and the retailers that supply it -- is often one of the first casualties when an economy starts to stumble. I think there are better stock picks in the retail space at the moment.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Home Depot. The Motley Fool has a disclosure policy.