Home Depot Stock in 2023: Bull vs. Bear

Home Depot (HD 0.41%) was undoubtedly a beneficiary of the coronavirus epidemic. People who spent more time at home turned to renovations as a result. Home Depot's generous capital-return policy is one of its most appealing features. The business has paid $19.4 billion in dividends since the beginning of fiscal 2020 and repurchased $20.7 million of its stock. This equates to 12% on the current market capitalization of $336 billion. Additional financial benefits are available to shareholders. Investors who are interested in a steady stream income can take advantage of dividends. Bulls could also be pointing to Home Depot's dominance within the Pro segment. Home Depot is expected to generate about half its total revenue from Pros. This is far more than the 25% split Lowe's (NYSE : LOW) has. Pros accounted for $19.5 billion in Home Depot's most recent quarter. Lowe's had $5.9 billion. Home Depot benefits in three ways from this favorable situation. It leads to better financial metrics. Home Depot has a greater operating margin and return than its smaller competitor. These professionals are often more loyal than DIYers. Last but not least, Home Depot is supported in times of economic decline by having more Pro customers. The hiring of pros is for larger and more complicated renovation projects. This is usually done by households with higher incomes that are less affected from recessionary concerns. Home Depot's business is doing well at the moment. Management expects that same-store sales will rise by 3% in fiscal 2023 (ends January 29), compared with 11.4% the previous year. What if the U.S. goes into a recession? Jamie Dimon, CEO of JPMorgan Chase, predicts that high interest rates combined with inflation will lead to the economy entering recession in 2023. It is important to consider the implications for the housing market. Home Depot's Pro business, as I mentioned earlier, is a great cushion. However, this does not make Home Depot immune to the effects of the Great Recession. As a result of the subprime mortgage crisis, Home Depot's annual revenues fell 7.8% and 7.2% respectively during the Great Recession. Also, shareholders must think about how to change consumer spending habits. With limited cash, many households spent their extra money on improving their homes during the pandemic lockdowns. Travel and leisure activities may see a rebound. The U.S. seems to have seen a rebound in passenger traffic, especially at the pre-pandemic level. JPMorgan Chase is an advertiser partner of The Ascent, which is a Motley Fool business. Neil Patel does not hold any stock mentioned. The Motley Fool recommends Home Depot, JPMorgan Chase and has positions in them. The Motley Fool recommends Lowe's Companies. The Motley Fool follows a disclosure policy.