Investing.com -- Shares of Restoration Hardware Inc. climbed 3% on Monday after Wedbush upgraded the stock from Neutral to Outperform, citing renewed confidence following discussions with CEO Gary Friedman and CFO Jack Preston.
The analysts now see RH (NYSE:RH) as "owning the luxury mountain," with a clear path toward sustained growth driven by new product launches and expanding store openings.
In the note, Wedbush said RH has successfully course-corrected from earlier missteps during the pandemic.
"RH lost its way during the pandemic, effectively stunting new product and store development to focus on product supply, while also too aggressively raising price," Wedbush wrote.
The company has since pivoted, introducing more new products in the past two years than in the prior six years combined. The analysts praised these offerings as both "trend-right" and more affordably priced, creating a "compelling value proposition" for RH's core aspirational luxury customers.
Wedbush believes RH's new product lines, which include popular trends such as reeded and motion furniture, will continue driving demand.
The firm also highlighted the company's ability to commercialize complete collections at competitive costs due to its scale.
"Momentum that began this summer is building," Wedbush noted, adding that new products are already contributing to inventory growth and could present upside risks for forecasts in the second half of 2024, 2025, and beyond.
Another key driver of RH's future growth lies in its expanding portfolio of "marquee new galleries," including planned openings in Paris, London, Newport Beach, and Milan.
Wedbush projects these new locations could boost sales by 3-5% annually in 2025 and 2026.
Despite economic uncertainties, the analysts believe RH is well-positioned to thrive, even without improvement in the housing market. Wedbush raised its price target on RH from $310 to $430, citing "sharply accelerating growth trends" and the company's long-term potential.