Can Home Depot (HD) Stock Rebound in 2026?

Home Depot (NYSE: HD) stock has created incredible shareholder value over time, but its stock has been down in the dumps recently. Let's see what's happening at Home Depot right now and whether or not it can do better next year.

Following the housing industry

Home Depot is the largest home improvement chain in the world, with more than 2,300 stores in the U.S., Canada, and Mexico. It's generally reliable for growth for a number of reasons: Externally, it works in a space that normally enjoys organic growth; people always need its home and building products. Internally, it has a formidable omnichannel shopping strategy, and it's always improving its game. Part of that is its acquisition process, and it has acquired several companies over the past few years that expand its addressable market.

Image source: Home Depot.

However, the real estate market has been suppressed since interest rates were first hiked, and there has been little relief since they started to come down. Many of Home Depot's products, especially larger ones, are also of a discretionary nature, and consumers are holding back from these kinds of big purchases while inflation remains high. This has led to a prolonged state of pressure at Home Depot, and there's not so much it can do while waiting out the challenging operating environment.

In the 2025 fiscal third quarter (ended Nov. 2), sales increased 2.8% year over year to $41.4 billion. About $900 million of that came from the company's acquisition of specialty building distributor GMS, which was completed in September. Adjusted earnings per share (EPS) were $3.74, down from $3.78 last year, and they missed Wall Street's expectations of $3.83. Management also lowered its full-year expectations for comparable sales from about 1% to "slightly positive" and operating margin from 13% to 12.6%.

The company still raised its dividend this year, and the dividend yields 2.6% at the current price.

Next year will be largely dictated by mortgage rates

As CEO Ted Decker noted on the third-quarter earnings call, "We remain focused on controlling what we can control." The company is investing in upgrading its value proposition for customers, using technology for actions like improving shelf availability of products and running its inventory flow more efficiently. Management believes it's gaining market share. However, it's likely to continue feeling pressure so long as the external environment doesn't improve.

Home Depot stock is down nearly 17% year to date as we get closer to the end of 2025, and it trades at a P/E ratio of 24. That's not exactly cheap for a company that's reporting declining earnings, and it points to how much the market appreciates Home Depot's stability and long-term opportunity.

Considering the stock's decline this year, it could look like an opportunity to buy before it bounces back. However, it could still go sideways for a while if the real estate market remains bleak.

Jennifer Saibil 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.