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Why Home Depot Stock Gained 17.7% in April

By Parkev Tatevosian – May 5, 2020 at 9:14PM

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The company saw increased demand from consumers tackling projects around the house.

What happened 

Shares of Home Depot (HD -0.86%) were up 17.7% in April, while the S&P 500 gained over 12%, according to data provided by S&P Global Market Intelligence. Staying open during a time when many businesses were forced to shut down because of the COVID-19 pandemic gave it a crucial source of revenue. 

So what 

Early in April, the company made an announcement highlighting the changes it was making to limit the spread of the outbreak while providing essential products and services to its customers. 

Among the safety measures announced, the company will close stores earlier, limit the number of customers allowed into stores at one time, and ask associates to check their temperature before reporting to work. 

The company also announced several benefits to take care of its workforce, including paid time off for all employees, bonuses for hourly associates in stores and distribution centers, and asking all who can work from home for store support functions to do so. 

An employee organizes a shelf at Home Depot

Home Depot stayed open during April. Image Source: Getty Images.

Now what 

As people have been confined to their homes, one activity on the rise has been home improvement projects. Home Depot has benefited from this increase in demand. Still, the surge may be short-lived as states in the U.S. begin lifting stay-at-home orders and consumers shift to other interests.

The company next reports earnings on May 21, and investors will be looking for how changes in consumer behavior and increased expenses to deal with the coronavirus outbreak affected profits. 

In mid-March, the company made sure it will not be short of liquidity by going to the debt markets and raising cash to the tune of $5 billion. Even if lowered revenue and increased expenses hurts cash flow significantly, it will have enough on hand to get it through to the other side. 

 

Parkev Tatevosian has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Home Depot and recommends the following options: long January 2021 $120 calls on Home Depot and short January 2021 $210 calls on Home Depot. The Motley Fool has a disclosure policy.

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The Home Depot, Inc. Stock Quote
The Home Depot, Inc.
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