Markets
LOW

3 Reasons Home Depot's Stock Could Fall

Source: Home Depot.

Despite the unexpected continuation of low interest rates, most economists believe that housing growth will eventually slow and that interest rates will have to move higher . Home Depot has had plenty of time to anticipate those moves and prepare with strategic initiatives it can use to make the transition to a more challenging economy. Yet just because it was successful with such initiatives in the past doesn't mean that they'll work again -- especially as Lowe's and other rivals have learned from their own past mistakes. Any failure could disappoint Home Depot shareholders and send the stock floundering at least temporarily.

3. Home Depot could have trouble expanding to international markets.

One of the biggest growth opportunities Home Depot has is to expand its big-box retail concept to other countries. Yet the home-improvement retailer has a mixed track record of success in adapting its business model to foreign markets.

In particular, Home Depot had a terrible experience trying to enter the Chinese market. In 2006, it bought a dozen stores from a locally based company and set out to duplicate the do-it-yourself experience in the emerging-market nation. But by 2012, Home Depot had decided to close all of its remaining stores in China, costing the company $160 million in the form of an after-tax charge. Home Depot conceded that the do-it-yourself concept didn't really take hold in China, where consumers were more inclined to pay professionals to have work done for them rather than tackling projects on their own.

Of course, some foreign markets will sport large numbers of enterprising customers who do their own work, and Home Depot should thrive in those areas. But the company should also be able to capitalize on its worldwide brand awareness by adapting its model to fit local culture and deliver what customers want.

With Home Depot firing on all cylinders, betting against the stock has been a bad move lately. Yet with these challenges still ahead of it, Home Depot could easily see its shares give up some ground even if its long-term strategy appears sound.

You can't afford to miss this

"Made in China" -- an all too familiar phrase. But not for much longer: There's a radical new technology out there, one that's already being employed by the U.S. Air Force, BMW and even Nike. Respected publications like The Economist have compared this disruptive invention to the steam engine and the printing press; Business Insider calls it "the next trillion dollar industry." Watch The Motley Fool's shocking video presentation to learn about the next great wave of technological innovation, one that will bring an end to "Made In China" for good. Click here !

The article 3 Reasons Home Depot's Stock Could Fall originally appeared on Fool.com.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Home Depot. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

Copyright © 1995 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

LOW HD

Other Topics

Stocks

Latest Markets Videos

The Motley Fool

Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

Learn More