Home Depot's Stock Plummets 3.72%: What's Behind the Sudden Slide?

Summary
• The Home Depot (HD) reports a 3.72% intraday drop to $344.71, its lowest since March 2024.
• Q3 earnings miss expectations by $0.10/share, with full-year guidance slashed to $14.478/share from $14.98.
• CEO Ted Decker cites 'consumer uncertainty, housing pressure, and lack of storms' as demand headwinds.

Home Depot’s stock has plunged to a 13-month low amid a bleak earnings report and revised guidance. The company’s third-quarter performance, marked by weak DIY demand and storm-related sales shortfalls, has triggered a sharp selloff. With intraday trading between $339.98 and $348.8, the stock’s volatility underscores investor anxiety over the housing market and macroeconomic risks.

Weak Housing Market and Storm Absence Weigh on Home Depot's Earnings
Home Depot’s Q3 earnings report revealed a stark disconnect between revenue growth and profit expectations. While sales rose 2.8% to $41.4 billion, driven by the GMS acquisition, adjusted EPS of $3.74 fell short of the $3.84 consensus. CEO Ted Decker explicitly tied the underperformance to 'consumer uncertainty, continued pressure in housing, and fewer storms,' which depressed demand for high-margin categories like roofing and generators. The company’s revised full-year guidance—projecting a 5% EPS decline—signals a prolonged slowdown in home improvement spending, exacerbated by 6-7% mortgage rates and stagnant housing turnover. These factors have created a perfect storm of weak DIY activity and professional trade demand, triggering a sell-off as investors reassess the stock’s growth trajectory.

Home Improvement Sector Struggles as Housing Woes Spread
The home improvement sector is broadly under pressure, with rival Lowe’s (LOW) down 1.39% intraday. At Home’s bankruptcy filing and store closures further highlight retail fragility in the space. While Home Depot’s professional trade segment remains resilient, the broader sector faces a dual threat: a frozen housing market and shifting consumer priorities. Neil Saunders of GlobalData notes that 'home improvement took a back seat to experiences and travel' in Q3, a trend likely to persist as economic anxiety lingers. This sector-wide malaise amplifies Home Depot’s challenges, as even strong sales figures fail to offset profit erosion.

Bearish Options Play Amid Technical Deterioration
• MACD: -7.37 (bearish divergence), RSI: 23.34 (oversold), Bollinger Bands: 344.71 near lower band (358.97).
• 200D MA: 366.98 (resistance), 30D MA: 377.67 (key support).
• Gamma: 0.025 (high sensitivity to price swings), Theta: -0.05 (moderate time decay).

Home Depot’s technicals paint a bearish picture, with RSI at oversold levels and price testing the 52W low of $326.31. The 200-day MA at $366.98 acts as a critical resistance, while the 30D MA at $377.67 could trigger a rebound if buyers emerge. For aggressive short-term bets, consider the following options:

• HD20251128P340 (Put, $340 strike, Nov 28 expiry):
- IV: 25.27% (moderate), Leverage: 81.86%, Delta: -0.387 (moderate sensitivity), Theta: -0.052 (strong time decay), Turnover: 257,160 (liquid).
- Payoff: A 5% downside to $327.47 would yield $12.54 per contract. This put offers high leverage and liquidity, ideal for capitalizing on a potential breakdown below $340.

• HD20251128P335 (Put, $335 strike, Nov 28 expiry):
- IV: 26.30% (moderate), Leverage: 127.34%, Delta: -0.273 (moderate sensitivity), Theta: -0.089 (strong time decay), Turnover: 149,803 (liquid).
- Payoff: A 5% downside to $327.47 would yield $7.53 per contract. This put’s higher leverage and moderate delta make it a compelling play for a sharper decline.

Aggressive bears should target the $340 level for a short entry, with a stop above $348.80.

Backtest The Home Depot Stock Performance
Below is the interactive back-test report. Key takeaway: Buying Home Depot after an intraday plunge of 4 % or more has delivered steady—but not exceptional—risk-adjusted returns since 2022, with drawdowns remaining manageable under the chosen 10 % stop-loss. Further tuning (e.g., alternative exits or dynamic sizing) could improve the Sharpe ratio.

Bullish Bets Fade as Home Depot Faces Headwinds
Home Depot’s selloff reflects a fundamental shift in consumer behavior and macroeconomic conditions. With housing turnover at a 30-year low and mortgage rates entrenched above 6%, the company’s growth model faces prolonged headwinds. Technical indicators suggest a test of the 52W low, with RSI at oversold levels hinting at potential short-term rebounds. However, the bearish case remains compelling, particularly for the HD20251128P340 and HD20251128P335 options. Investors should monitor Lowe’s (LOW), down 1.39%, as a sector barometer. Break below $340 triggers a deeper correction; hold short positions into Nov 28 expiry.