The Motley Fool spotlights mid-cap luxury goods retailer RH for patient investors

Investors with a long-term horizon should take a closer look at shares of luxury home goods seller RH, writes Jeremy Bowman, an analyst at the Motley Fool. The company has faced a number of challenges, leading to a major fall in its share price since the highs reached during the pandemic. But it has several drivers of growth – from expansion into Europe to launching new businesses – that could turn things around, Bowman argues.

RH stock may deliver strong returns to patient investors willing to buy the shares now, believes Motley Fool stock market analyst Jeremy Bowman. He made that recommendation despite the stock's weak performance of late: it is down 54% this year and has lost about 76% of its value since its all-time high in 2021. At the close yesterday, October 20, one share was worth $179.68. In premarket trading today, the stock was down 0.5% as of this writing.

The years following the pandemic have been challenging for nonessential retailers targeting affluent customers. Add to that a weak housing market, which has put pressure on furniture sales, and inflation, which has weighed on consumer spending, Bowman said.

Now, further tariffs imposed by U.S. President Donald Trump are creating new problems for the company, he writes. Since April 2, the day before the "Liberation Day" tariffs were announced, RH shares have fallen 28%. Meanwhile, the U.S. labor market is weakening, which is likely to put even more pressure on consumer spending, the -Motley Fool analyst notes.

Despite the challenges, RH's financial performance is improving, Bowman points out. For its fiscal second quarter, which ended August 2, the company reported an 8.4% year-over-year increase in net revenue to $899.2 million. Net income for the same period jumped 79% to $51.7 million – evidence, Bowman says, that the company's efforts to revamp its product line and to expand into Europe, started in 2023, are paying off.

In addition, the company has reacted quickly to tariff risks: it has managed to move production almost entirely out of China, with plans to exit India in the near future, Bowman noted.

RH also has other opportunities for growth, the analyst added. In addition to launching stores in Europe, the company is experimenting with new lines of business: it has opened several restaurants and guesthouses, leases out a charter jet and a yacht, and buys homes and fully furnishes them for turnkey sale.

"Overall, RH stock may continue to struggle due to pressure from tariffs, the slow housing market, and weaker consumer spending, but the company has the pieces in place to deliver impressive results when the macro environment improves," Bowman concludes.

Ten Wall Street analysts advise holding RH shares ("hold"), according to MarketWatch data. Another nine consider the stock a "buy" (six "buys" and three "overweights"), while three others recommend selling (one "underweight" and two "sells"). The average target price is $251 per share, implying upside of nearly 40% from the last closing price.

The AI translation of this story was reviewed by a human editor.