To The Moon

$Home Depot(HD)$ produced its strongest comparable-sales increase in nearly four years, but the composition of demand remained conservative. Customers continued repairing and maintaining their homes while postponing many large discretionary renovations, leaving the company positioned for a housing recovery that has not yet arrived.

Home Depot reported on August 18 for the quarter ended August 2. Revenue increased 5.7% to $47.86 billion, adjusted earnings reached $4.92 per share and total comparable sales rose 1.7%. US comparable sales increased 1.3%. Both revenue and earnings exceeded market expectations. Home Depot’s official quarterly-results page provides the release and presentation.

The bullish evidence is that demand has finally returned to positive territory despite high mortgage rates and limited existing-home turnover. Home Depot benefits from an ageing US housing stock that requires continued spending on plumbing, roofing, paint and general maintenance. Its professional-customer business provides exposure to larger projects, while nationwide Express Delivery can improve convenience for contractors who need products quickly.

The quarter also included $730 million of tariff refunds, of which approximately $685 million reduced cost of goods sold. That helped profitability but is not a recurring operating driver. Investors should therefore separate the benefit from underlying merchandise margins.

The bearish evidence is that large renovations remain weak. High mortgage rates reduce home transactions, and moving often triggers spending on kitchens, bathrooms and flooring. Consumers facing expensive food, fuel and credit are also favouring smaller projects. Management retained its broad annual outlook rather than raising it after the beat, suggesting the company does not yet see a decisive demand acceleration. Reuters’ August 18 results analysis explains the contrast between maintenance demand and larger remodels.

Home Depot closed almost unchanged at $337.49 after trading from $331.06 to $349.80 on 6.6 million shares. The retreat from the session high shows that investors treated the beat as confirmation rather than a new growth phase.

HD Daily Chart

Home Depot’s daily chart remained technically constructive ahead of earnings, with the stock trading around the mid-$330s and repeatedly finding support near $323–$325, while my $HD 20260821 320.0 PUT$ August 21 $320 put strike sat below that established support area and therefore offered a reasonable margin of safety.

I chose to sell the put before earnings because the event elevated implied volatility and increased the premium available, allowing me to collect approximately $1.89 per share while taking the view that HD was unlikely to close below $320 by expiration unless earnings produced a substantially worse-than-expected reaction.

Following the results, the stock continued to hold comfortably above the strike and the option value collapsed to roughly $0.22, allowing the position to capture about 88% of the original premium through a combination of favorable price action, volatility contraction and time decay. With most of the potential profit already realized and the remaining reward relatively small compared with the risk of an unexpected late move, I closed two-thirds of the position to secure the gain while leaving the final one-third to run toward expiration, provided HD continues to hold above the $320–$325 support area.

The evidence leans neutral to moderately bullish. Comparable sales, professional demand and maintenance spending are improving, but housing turnover and large projects remain subdued. The view would be invalidated by comparable sales returning negative, professional demand weakening or margins deteriorating after the tariff-refund benefit disappears. This is personal opinion for education and is not financial advice.

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Disclaimer: This article is for informational and educational purposes only and does not constitute financial, investment, or trading advice. The views expressed are personal opinions based on publicly available information and are subject to change without notice. Investors should conduct their own research and consider their financial situation, risk tolerance, and investment objectives before making any investment decisions. I do not guarantee the accuracy or completeness of the information presented.