RH (NYSE:RH) demand is stabilizing, and 2024 is "set for a big ramp in revenue trends," claimed BofA analysts in a note to clients on Wednesday.
They reiterated a Buy rating and $315 price target on the stock and added that RH appears positioned for a return to double-digit growth.
"New gallery openings and conversions have been a critical driver of revenues and operating income for RH, as they generate double the revenues of legacy galleries. Over the next several years, RH plans to open 30 new galleries, which we estimate will increase square footage by nearly 70%," explained the analysts.
"By our estimates, new galleries could generate an incremental ~$100mn in revenues per quarter by 2Q25 compared to less than $20mn in 2023."
The analysts added that international expansion will be critical to RH's growth story "given that it opens new markets, would establish RH as a global luxury brand and could drive meaningful multiple expansion."
In addition, they believe the firm's current revenue growth estimates could prove to be conservative.
"Trends for RH appear to have stabilized, with 1Q23 revenues above consensus and management raising the midpoint of full year 2023 guidance by 1.7% (first raise since 3Q21). However, premium furnishings trends remain soft (down -22% in April) and weak overall high-income spending and housing could be a larger-than-anticipated headwind," the analysts concluded.