Why Restoration Hardware Holdings Inc. Surged Today

Is Restoration Hardware's stock surge meaningful or just another movement?

Jun 12, 2014 at 11:37AM

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of home furnishings retailer Restoration Hardware Holdings (NYSE:RH) soared 15% today after its quarterly results and outlook topped Wall Street expectations.

So what: Restoration Hardware's stock has been volatile over the past year on uneven growth, but today's first-quarter results -- adjusted earnings per share of $0.18 topped Wall Street by $0.07 on a revenue spike of 22% -- coupled with upbeat guidance are forcing analysts to quickly increase their expectations. Management said it expects to generate annual sales of $4 billion-$5 billion, mid-teen operating margins, and significant free cash flow once its real estate transformation is complete in North America, providing some bullish visibility into the company's long-term prospects as well. 

Now what: Management now sees full-year EPS of $2.24-$2.30 on revenue of $1.86 billion-$1.89 billion, versus its prior view of $2.14-$2.22 and $1.83 billion-$1.86 billion. "The business momentum and strong trends we are seeing thus far in 2014 give us further confidence in our financial outlook for the year," said Chairman and CEO Gary Friedman in a press release. "Looking forward, we remain focused on our key value-driving strategies including the expansion of our product offer and the transformation of our retail stores." With Restoration Hardware shares busting to a new 52-week high today and trading at a steepish forward P/E of 30, however, I'd hold out for a wider margin of safety before betting too heavily on those prospects. 

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Brian Pacampara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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