Cramer Warns Home Depot Stock Trapped by Rising Rates

Jim Cramer, during his October 1 discussion on the Dow Jones Industrial Average’s third-quarter underperformers, singled out The Home Depot, Inc. (NYSE:HD) as one of the laggards. He admitted the stock was a disappointing pick for his Charitable Trust, noting its 19% decline. Cramer attributed the struggles to the sharp rise in interest rates, suggesting relief for Home Depot’s stock is unlikely until rates fall.

Despite the downturn, Home Depot’s second-quarter results exceeded expectations. Sales rose 5.7% year-over-year to $47.9 billion, with comparable sales up 1.7%. The company’s professional-customer segment showed strength, outperforming the do-it-yourself business. Online sales also surged, marking a fifth consecutive quarter of double-digit growth. Management maintained its fiscal 2026 forecast, expecting total sales growth of 2.5% to 4.5% and adjusted EPS growth between zero and 4%.

The housing market remains a significant challenge. Affordability and consumer uncertainty are limiting larger home improvement projects. CFO Richard McPhail noted historically low housing turnover, with no signs of a turning point. Cost pressures from fuel, energy, and other input costs also pose challenges, though tariff refunds are expected to provide partial relief. The company’s forward earnings multiple of 19x is notably higher than Lowe’s Companies, Inc.’s (NYSE:LOW) 14.6x, which may deter some investors.

Insider Monkey’s data reveals stable hedge fund ownership, with 98 funds holding Home Depot in Q2, slightly down from 100 in Q1. Fisher Asset Management remains the largest stakeholder, holding 10.36 million shares. Short interest is low, at 1.18% of the public float as of mid-September, indicating limited bearish sentiment.