Analyst downgrades Home Depot after strong gains

NEW YORK -- Home Depot, the largest U.S. home-improvement retailer, should benefit substantially from the expected housing market recovery, according to an Oppenheimer analyst. But until the recovery starts to gain traction, Home Depot's shares are expected to trade sideways, the analyst said Wednesday, and downgraded the stock.

Home Depot has weathered the prolonged housing slump well, focusing on cutting costs and providing materials for smaller home improvement projects, like paint and bathroom accessories, as homeowners hold off on larger renovations. In its most recent quarter, net income rose 12 percent as revenue edged up 2 percent to $20.57 billion. Its share price has responded to the strong results, shooting up 45 percent since the beginning of the year.

Now, Oppenheimer analyst Brian Nagel said the Atlanta-based company's shares are "due for a breather," as he believes the housing recovery is reflected in the stock in the near term, and shares will probably trade sideways for a while.

Longer term, however, Nagel said Home Depot is positioned well to "capitalize on improving demand trends within the home improvement category." He raised his price target on the stock to $67 from $61.

Shares of Home Depot slipped 44 cents to $60.51 in midday trading.