Analyst: Home Depot Earnings Beats May Get Smaller

HD's rough week has it below its year-to-date breakeven level

The shares of Home Depot Inc (NYSE:HD) are down 0.5% to trade at $176.54 this morning, near the bottom of the Dow, after BofA-Merrill Lynch downgraded the home improvement retailer to "neutral" from "buy" while slashing its price target to $195 from $219. The analyst in coverage sees 2018 as peak earnings growth for HD, and that "the beats may get smaller, which may keep investors on the sidelines"

Earlier this week, Home Depot stock fell despite a third-quarter earnings beat, now staring at a 5% weekly loss, dragging the stock further below its year-to-date breakeven level. The shares showed signs of breaking out of their slump in early November, but were swiftly rejected by their 30-day moving average. The equity has now given back 18% since its mid-September record high of $215.43.

Should Home Depot continue to churn lower, there is ample room aboard the bearish bandwagon. While short interest increased by 7.3% in the most recent reporting period, the 9.25 million shares sold short is less than half the 2017 high, and represents a meager 0.8% of HD's total available float.

Options volume has spiked today. At last check, 12,000 HD options had already changed hands in the first hour, two times the expected volume and pacing for the 97th annual percentile. Leading the charge is the November 200 put, followed by the December 200 put.