Shares of RH (RH 14.81%) were surging today even as the broad market was tumbling for a third straight session in response to President Trump’s “Liberation Day” announcement of tariffs.
Today’s gains came as the company updated its guidance after hours on Friday and received a favorable analyst note from Stifel. As of 1:05 p.m. ET, the stock was up 14.2% even as the S&P 500 (^GSPC 0.29%) was down 1.8% at the same time.
Image source: RH.
RH has upside
RH was in the bizarre position last Wednesday of holding its fourth-quarter earnings call while President Trump was announcing the tariffs. The stock plunged more than 40% Thursday in response to weak results and guidance, as well as the presumed impact of the tariffs.
In a press release after hours on Friday, the company said it has been operating with 25% tariffs on imports from China since the first Trump administration and has moved most of its China production to Vietnam. It’s also moved a significant percentage of China production to its factory in North Carolina.
Management also said it believes that Trump is using the tariff as a negotiating tool, noting the president’s reports of a productive call with Vietnam, though that belief seems speculative at this point.
In RH’s quarter-to-date update, the company said the demand, a proxy for orders, is up 17%, and that it doesn’t have more market risk than other higher-end home furnishing retailers.
It also announced 2025 free cash flow guidance of $250 million-$350 million, meaning the stock is trading at a multiple of about 10 based on that forecast. That compares to a free cash flow loss of $214 million in 2024, which was driven by accumulation of inventory as it released new product lines.
One Wall Street analyst still approves
This morning, Stifel weighed in on the stock, maintaining a buy rating on it, but lowering its price target from $450 to $390. It estimated that the “Liberation Day” tariffs would generate a $362 million adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) headwind, though it thought the stock’s plunge on Thursday represented the worst-case scenario.
RH’s guidance implies some certainty at a time of high uncertainty, but its premise that the tariffs are just a negotiating tactic could be wrong.
Regardless of the impact of tariffs and a possible recession, the business is strong enough that it should eventually recover. Even after today’s bounce, the stock is still down sharply from a week ago, meaning buying it now could pay off for patient investors, though volatility is likely.