Josh Brown says he should own RH stock: should I buy now?

RH Inc. (NYSE:RH), formerly Restoration Hardware Holdings Inc. shares, are up 52% this year, fueled by a surge in retail stocks. The company’s stock has gained nearly 175% over the last 12 months, making it one of the most exciting speciality retail stocks to buy in June. RH spiked more than 14% on Thursday last week after announcing better than expected results. It also revised upwards its top-line guidance for this year.

RH has exciting growth

RH stock’s current rally is driven by a promising recovery of the retail industry. The SPDR S&P Retail ETF (NYSE:XRT), which tracks the S&P 500 US retail sector stocks, is up 51% this year and 129% over the last 12 months. The primary catalyst for this rally is a surge in consumer purchase activity after the re-opening of the US economy. 

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RH’s revenue soared 78.30% Y/Y in the recent quarter. It issued a bullish outlook on revenue. The company sees revenue growing 25% to 30% in 2021 compared to the previous guidance of 15% to 20% growth. Speaking after the earnings announcement and the subsequent rise in the stock price, Ritholtz Wealth Management CEO Josh Brown told CNBC that RH is a stock he should own. He said the home furnishings company still looks compelling despite its high P/E ratio of 50.56. RH’s forward P/E of 27.26 suggests there is more upward movement to come.

Technical overview

Technically, RH shares appear to be trading in an ascending channel formation in the daily chart. The stock is experiencing a bullish bias in the market sentiment. It recently pulled back to avoid crossing to overbought levels of the 100-day moving average.

Investors can target bullish profits at about $700.97 and $736.02. On the other hand, investors that expect an immediate pullback can target bearish profits at about $645.48 and $613.38.

Bottom line: RH bull-run looks unstoppable

In summary, RH shares appear to be on an excellent bull run. The current valuation looks slightly steep, but when you factor in expected top-line and earnings growth, it begins to make sense why investors are willing to pay a high premium to own the stock.

RH is a growth stock with more upside to come, but you cannot rule out short-term pullbacks.